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Dependent Care Assistance Programs Taxability Guidance Issued


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The IRS issued guidance on the taxability of dependent care assistance programs (DCAPs), also known as dependent care flexible spending accounts (FSAs) for 2021 and 2022. Carryovers of unused DCAP amounts typically are not permitted, although a 2 ½ month grace period is allowed. Recent coronavirus-related relief allows employers to amend their plans to permit unused DCAP carryover amounts or extend the permissible grace period to plan years ending in 2021 and 2022.

If these dependent care benefits would have been excluded from income (if used during taxable year 2020 or 2021) these benefits will remain excludible from gross income and are not considered employee wages. They will also generally not be taken into account for purposes of applying the exclusion limits of IRS Code Section 129.  

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This blog is intended to be a compilation of information and resources pulled from federal, state, and local agencies. This is not intended to be legal advice. For up to the minute information and guidance on COVID-19, please follow the guidelines of the Centers for Disease Control and Prevention (CDC) and your local health organizations.

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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Adam Kuck

Adam Kuck

The first things you will notice about Adam Kuck are how personable and organized he is. As your Account Representative, Adam will be on hand to walk you through your group's plans, conduct employee and retiree meetings, and be your advocate when a problem arises. Adam first joined National Insurance Services (NIS) in 2013 as an intern in the Marketing Department. He enjoyed NIS’ company culture and team values so much that he later applied and was hired as a Retirement Income Account Representative for NIS and MidAmerica Administrative & Retirement Solutions. Adam specializes in Health Reimbursement Arrangements (HRAs), Flexible Spending Accounts (FSAs), and 403(b) Special Pay Plans (SPP) for clients in Minnesota, Pennsylvania, and Oklahoma. He is a licensed Health and Life insurance agent.