How does a day care get paid in a Flexible spending account?
- Chosen by Voters You pay the bill (the employee). There is usually an administration company that you employer has hired to handle the reimbursement to you. But it can be someone at your company that handles the reimbursement.The IRS doesn't get involved in the individual detailed bill. The IRS expects the companies doing the reimbursement to know what is and what isn't allowed. It's the honor system which is the way many things work with taxes. – the administrators could be audited- the employee could be audited and this information would be reviewed. I think this would be related to an audit that was started for another reason – but the IRS can check anything during an audit (it wouldn't be the "reason" for the audit). You submit the bill and the administration reviews it against the list of allowable expenses. And then sends you a check for the reimbursement if the bill is allowed (some companies do direct deposit).- example #1: in 2010 over the counter drugs were allowed. In 2011 they are not. So the administrator makes sure this bill is not for over the counter drugs.- example #2: general massages are not covered. massages related to physical therapy or another condition would be. The administrator would need to get extra documentation related to the bill before the bill would be reimbursed.With day care providers it's a very similar process. But the administrator makes sure the requirements are met, then pays you (the employee) the reimbursement.- child meets the age requirement. I think through age 12 now – once 13 does not count- the child care has a license. You can't get reimbursement if you have an unlicensed person care for your child – like a friend or neighbor who makes a little extra money by watching a few kids.* There might be more requirements.For childcare – you have to have the money deducted from your check, BEFORE you can submit reimburement. For healthcare – you can get reimbursed before the money has been deducted from your check. Meaning you say you want $2000 in the account for the year, in January you have had a very small portion of this deduction, BUT in January you can submit bills for the entire $2000 if you have already incurred the expensies. If you leave the company, you DO NOT have to pay the money that you has not been deducted from your check but you have already received reimbursement for. (This is federal law).The expenses must be incurred during the calendar year you signed up for (for example, all bills would have need to be dated 2011). But you have until March of the following year (right now, 2012)to submit the bill to get paid. The IRS deadline is March 31. But many administrators have an earlier deadline like March 1 or March 15 to make sure everything is handled before the IRS deadline.Also, there are IRS maximums regarding how much you can set for your child care and healthcare flex spending accounts. I beleive the 2011 maximum for both is $5000. The employer is allows to establish a lower maximum – many companies set it at $3000. If you leave your employer and go to another company that has another plan, you can join that plan but you can only contribute to the IRS annual maximum – for example: if you contribute $3000 to the first company, you can only contritubute $2000 at the 2nd company, which makes the $5000 federal maximumAnd finally the federal maximums are per family not per individual. If you are married, you don't get to contribute $5000 and your spouse $5000 for a total of $10000. It's a $5000 maximum for each type of plan (child card or healthcare) per family.I know this is a lot of information. Hopefully I presented it in a way that is easy to understand. It's will all help you manage your reimbursement accounts. Source(s): benefits specialist Edited 4 months ago 67% 2 Votes 2 people rated this as good