Source: http://www.drtaccounting.com/2012/03/section-129-dependent-care-assistance.html
Timestamp: 2017-06-22 16:31:10
Document Index: 798645739

Matched Legal Cases: ['§ 129', '§ 129', '§ 21', '§ 129', '§ 129', '§ 21', '§ 129', '§ 21', '§ 21', '§ 129', '§ 21']

Dr. T 's Accounting Problems and Tax: Section 129 Dependent Care Assistance Exclusion DCAP
Calculating Net Income, Accounting Basics, Balance Sheets, Job Order Costing Examples, Manufacturing Overhead, Expanded Accounting Equation, Journal Entries, Process Costing, and many more financial and managerial accounting topics. Ideal for small business accounting and college accounting classes. Also, information on IRS federal tax code. Monday, March 12, 2012
Section 129 Dependent Care Assistance Exclusion DCAP
What is the § 129 Dependent Care Assistance Exclusion
§ 129 (DCAP) of the internal revenue codes provides an exclusion for “dependent care assistance” received by an employee from his employer, if the employer has a qualifying “dependent care assistance program" in place. There is a $5,000 cap on the employer's DCAP program and the amount that an employee can take advantage of the program.
For corporate cash re-imbursements, the employee must take a pay cut equal to an amount under $5,000 and then submits childcare receipts to his employer. While amounts received as salary would have been taxable, amounts received instead of a cash salary under a DCAP are tax-free. This could save the taxpayer significant sums of money depending on which tax bracket that he is in.
A taxpayer cannot use the same dollars or child care expenses to generate both an exclusion under the Dependent Care Assistance Program and a credit under § 21.
More Specifically, § 129(e)(7) provides that an expenditure used to support an exclusion under § 129 cannot be the basis of a credit under § 21. However, a taxpayer whose employer offers DCAP benefits can choose between the benefits of § 129 and the benefits of § 21 child care credit.
The choice is available for up $5,000 of qualifying expenses. Because of the higher cap on the § 21 credit, even taxpayers who maximize their § 129 exclusion may claim a $1,000 credit under § 21, assuming that they have at least two qualifying children and at least $6,000 of qualifying expenses. This exclusion applies only under a specific program that satisfies the specific requirements of requirement.
For additional information, please see IRS Publication 15-B (2012), Employer's Tax Guide to Fringe Benefits
DDependent Care Assistance Exclusion,