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Conference 7.286::digital

Title:The Digital way of working
Moderator:QUARK::LIONELON
Created:Fri Feb 14 1986
Last Modified:Fri Jun 06 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:5321
Total number of notes:139771

280.0. "Dependant Care Assistance Benefit." by GOJIRA::PHILPOTT (Ian F. ('The Colonel') Philpott) Mon Mar 16 1987 12:06

    The subject of Day Care provisions has been debated intermittently and
    this is sort of related to it.
    
    I was watching morning TV (Channel 7 out of Boston - CBS I think) this
    morning and they started discussing a type of benefit...
    
    There is a benefit called Dependant Care Assistance Benefit (DCAB) which
    an employer can offer its employees that reduces both the employees
    income tax and the employers tax. It works like this:
    
    suppose you pay $5000 per annum to care for a dependant. You can make
    an arrangement with your employer to take a $5000 cut in [taxable] salary,
    and submit $5000 in invoices for the dependant care to your employer
    who pays them.
    
    Your taxable income has gone down by $5000 so you get full credit for
    the cost of providing dependant care.
    
    Your employers payroll has gone down by $5000 so they get the benefit
    of paying payroll and other taxes on the lower amount.
    
    Apparently this is an IRS approved [official] scheme. Also remember
    this is much wider than providing day care since ANY form of dependant
    care (day care, companion for youy infirm mother, etc etc etc) is
    elligible. 
    
    Now who gets to do the negotiating for this benefit?
               
    /. Ian .\
T.RTitleUserPersonal
Name		DateLines
280.1check before you negociateSAUTER::SAUTERJohn SauterTue Mar 17 1987 07:256
    This sounds bogus to me.  The IRS would certainly go after a $5000
    benefit on the grounds that it was compensation, and therefore taxable
    as income.  Before pushing for this, get information from an IRS
    office--don't assume that a Boston TV show has accurate tax
    information.
        John Sauter
280.2VINO::KILGOREWild BillTue Mar 17 1987 07:498
    Read the same thing in a magazine recently (Working Mother, I think).
    The only caveat there was that if you forecast $5000 in child care
    expenses, but only pay out $2500, you forfeit the rest - the advice
    was to estimate conservatively, and deduct expenses over the estimate
    on the tax forms.
    
    Sounded like a win-win situation. How do we get DEC to consider
    it?
280.3This is real, not bogusRSTS32::COFFLERJeff CofflerTue Mar 17 1987 07:5531
    Nope, this definitely isn't bogus.  My prior employer offered
    administering this stuff as a service and apparently does well in this
    business.
    
    The before-tax deductions aren't limited to DCAB.  As I recall (it's
    been a while, though), there's also MRB (Medical Reimbursement
    Benefit), MI (Medical Insurance Benefit), LI (Life Insurance Benefit),
    and others that I'm sure I've forgotten.
    
    The way it works: You need to determine, up front, what your costs will
    be during the year (if there is money left over afterwards, you do get
    it back but must claim it via valid claims).  Then there are payroll
    deductions to pay into these funds.  You can then set up automatic
    monthly payments (good for DCAB, say) or you can submit claims (similar
    to JH Medical Insurance).  MRB is nice because it can cover what MI
    doesn't (for example, it can cover the other 20% than JH won't).
    
    I don't have dependents, but DEC may indeed take a form of this right
    now: If you have dependents covered on Medical Insurance (and you must
    pay a fee), are those fees taxed?  Also, I believe that the Digital
    SAVE program is a form of this (SAVE funds are before-tax, aren't
    they?)  In fact, DEC distributed a memo a while ago that talked about
    these cafeteria plans: The federal government is looking into
    restricting these types of plans significantly and DEC suggested that
    you write your congress-person and state your feelings on the
    usefulness of the SAVE program (and related plans).
    
    In any case, this is real, not bogus.  For how long?  Who knows:
    Perhaps forever, perhaps one year.  You can't tell how tax laws will
    change in the future.  Who do you negotiate with to get these
    deductions?  I'd probably think that personnel would be a good start.
280.4Yup its realSYSEFS::MCCABEIf Murphy's Law can go wrong .. Tue Mar 17 1987 17:465
    I spoke to my business accountant.  We have already planned on the
    deduction/credit to be funnelled through the family business accounts.
    It is a perfectly legitimate credit.