How does childcare reimbursement work?
Asked by june.thirteenth
I am trying to see if it is worth switching jobs to get childcare reimbursement. does your company offer it? how does your company's program work??

Best Answer:
I estimated how much I thought I would spend in daycare during the year, up to the maximum amount of $5000, and gave that number to my employer during the open enrollment period. They then divided that amount by the number of paychecks I would receive during the year (i.e. 26 paychecks if paid bi-weekly), and that amount was automatically deducted from my paycheck before they took out taxes. Then every time I paid for daycare, I asked for a receipt showing how much I paid and to whom. Your daycare provider must provide you with their taxpayer identification number (TIN). I then wrote the daycare provider's name, address, TIN, my child's name, and the dates of service on EACH receipt and mailed or faxed it to the reimbursement provider. Be sure to keep a photocopy of all of your receipts!!! I found that taping my receipts onto a single paper and writing the information on the page once was easier than writing the info on each receipt. Once my employer had deducted enough from my checks to cover the daycare expenses, the reimbursement provider would mail me a check. The trick is that you have to pay money into the reimbursement provider before you can get reimbursed for your expenses. And when tax time came, I was not able to claim very much if any of the child care tax credit because I had paid up to $5000 of my expenses with pre-tax dollars. Also, you or your accountant will need to calculate whether the tax savings you will get from paying daycare with pre-tax dollars will be more than the tax credit you will be forfeiting. When I first got my job, I was not making enough for the tax savings to be worth it. After I got a promotion and my husband went back to work, we were in a higher tax bracket and the tax savings were definitely higher than the tax credit alone would have been. Be sure to talk to an accountant or to your employer's HR or Accounting departments for advice.