Dependent Care, W-2 Over-Withholding and Fiscal Year Plan

[jsb]

My first time with Fiscal Year rather than Calendar year plans...

We have a fiscal year based plan (July to June). Employee starts work in August 2012 and elects $5000 for dependent care account, which is pro-rated across the balance of the plan year. For new Plan Year starting 7/1/13, employee again elects $5000 which is pro-rated across the whole year. Net result is that calendar year 2013 W-2 shows a dependent care deduction in excess of $5000. However, $5000 maximum deduction for each plan year has been properly limited.

Anybody have experience with how the IRS might regard this?

Thanks!

[Lou S.]

I could be wrong as I have not worked on a Dep care plan in a long time and never on an FYE plan but I thought the Dep care rules limit the $5,000 on a CYE basis regardless of PYE similar the 402(g) limit in a 401(k) plan.

[masteff]

You might try to track down IRS Notice 89-111 which provided guidance on reporting of dependent care plans. Not having access to it, I can't say if it answers your question sufficiently or not.

Edit: it is referenced in Notice 2005-61 http://www.irs.gov/irb/2005-39_IRB/ar14.html