During a time when schools, daycare facilities, and summer camps may be up in the air, you may be looking for alternative means of childcare. What about Dependent Care FSA babysitter hiring? Is it allowed? What do you need to know?
Before we get into that, a quick tip for those whose need for child care has either increased or decreased due to COVID-19. Changes in the cost of child care is considered a qualifying event. This means you are permitted to change election amounts.
Can you hire a babysitter using Dependent Care FSA funds?
In short, yes! A Dependent Care FSA allows you to set aside tax-free dollars from your paycheck to pay for eligible child or adult dependent care expenses. In addition to care options such as day camps and after-school care, in-home care through a babysitter, nanny, or au pair would be eligible.
All care options must be used “so you (or your spouse) can work or look for work”. So no, you unfortunately can’t hire a babysit for date night using Dependent Care FSA funds.
Who are you allowed to hire as a babysitter?
You may be exploring a lot of options now. Options may include professional nannies, neighbors, and even family members. Fortunately, all of these are considered eligible child care options.
This person babysitting cannot be:
- Your spouse
- Your child who is under the age of 19
- The parent of your qualifying dependent (this only applies if your qualifying dependent is your child and is less than 13 years old)
- A dependent claimed on your or your spouse’s federal tax return
There are also some nuances based on whether the person you hire would be considered an employee or self-employed. See what the IRS has to say about this.
What information do you need for reimbursement and compliance purposes?
In order to use funds in your Dependent Care FSA and be in compliance with the IRS, you will need information about the person you hire and the care they provided.
For your claim:
To submit a dependent care claim, we will need to know the type of service provided, date(s) the service was provide, the name of the dependent(s) cared for, the provider, and your out-of-pocket expense for the service.
See our Submitting Claims Walk Through for assistance.
For tax filing purposes:
As always, you have to report contributions to your Dependent Care FSA on your tax return. You will also need to provide information on the care itself. You need a name, address, and either a social security number or employer identification number depending on who provided the care.
See the tax topic on the IRS website for Child and Dependent Care Credit for more information. If you have any questions, you should contact a licensed tax preparer.
M says
What if we decide not to send our child to day camp (normally ~4k for 6 weeks, this year the camp asked for 3k for 4 weeks) and we’ve got $1500 tied up in DFSA funds after stopping contributions in May? Our 9-yo is too old to really need a “babysitter” while we work from home, but have we forfeited this money because there’s nowhere for him to go?
Benefit Resource says
What qualifies for DCA can be proud. Both before school care and after school care. If you do end up using a babysitter you can always use our dependent care receipt form.
Sakinah Miller says
I also have a question about changing my dependent care contribution, since my child is no longer in daycare and summer daycare will not be an option. Will it be possible for me to decrease my contribution?
Benefit Resource says
Yes due to COVID the IRS is allowing for mid year election changes. Any mid year election change would be done through and at the discretion your employer. My advice would be to inquire with your hr as they should be able to provide further gudiance.
Michelle Egorin says
Can the cost for virtual camps be reimbursed? My daughter is doing a few virtual dance camps that have a cost.
Benefit Resource says
Unfortunately Virtual camps are not eligible as their primary purpose is not for the well being and safety of the child while you are able to work. Possible we could get further guidance on this but as it stands they are not eligible.