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<br />Dependent Care Flexible Spending Account VS. the Federal Income Tax Reduction <br /> <br />You may use the tax credit for the Dependent Care Flexible Spending Account for eligible dependent care <br />expenses. You may not, however, use the tax credit and Dependent Care Flexible Spending Account for <br />the same expenses. Furthermore, any contributions to the Dependent Care Flexible Spending Account <br />reduces dollar-for-dollar the amount you may claim for a dependent care tax credit, or even eliminate <br />your tax credit opportunity entirely. <br /> <br />If you use the Dependent Care Flexible Spending Account, you save money right away. If you take a <br />deduction for day care expenses, you claim your savings at the end of the tax year. <br /> <br />The amount of tax credit for which you are eligible is a percentage of the dependent care expenses you <br />incur and pay during the year, up to a limit of $2,400 for one eligible dependent or $4,800 for two or <br />more. The percentage that applies to you depends on your adjusted gross income (or the combined <br />adjusted gross income for you and your spouse). <br /> <br />As a general rule: <br /> <br />· If our family's total annual adjusted gross income is above $24,000, you probably will save more <br />if you use the Dependent Care Flexible Spending Account. <br />· If our family's total annual adjusted gross income is less than $24,000, the best method to use <br />will vary according to your individual circumstance. You may want to estimate your tax savings <br />using both methods and compare the results. <br /> <br />You may want to review IRS Form 2441 and the instructions on how to calculate the tax savings of the <br />child care credit, as compared to the Dependent Care Flexible Spending Account. You should consult a <br />professional tax advisor to determine the method best for you. <br /> <br />Medical Care and Dependent Care Flexible Spending Accounts Treated Separately <br /> <br />If you have a Medical Care Flexible Spending Account and a Dependent Care Flexible Spending <br />Account, the IRS requires that they remain separate. You may not transfer money between the accounts <br />or combine expenses for reimbursement. For example, you cannot be reimbursed for health care <br />expenses from your Dependent Care Flexible Spending Account or vice versa. <br /> <br />Changing Your Contributions <br /> <br />In general, you cannot change the amount of your contributions during the year unless you have a <br />qualified change in status that affects your participation. (Defined in the Flexible Benefit Administration <br />Manual). <br /> <br />The Use It or Lose It Provision <br /> <br />Your contributions must be used for expenses incurred in the same year or no later than the 2 Y2-month <br />grace period. An expense is considered "incurred" on the date the service is provided, not when you are <br />billed or when you pay for it. Be sure to plan carefully and conservatively. You may wish to use the <br />planning tools, available when you enroll. <br /> <br />Federal law requires you forfeit any money remaining in either account. You may not withdraw or carry <br />over money to the next year. Forfeited balances are used to offset the administrative costs of the plan. <br /> <br />4 <br />