IRS Issues Final Dependent Care FSA Rules

August 14, 2007 ( - Employees can pay day camp expenses with their dependent care flexible spending accounts (FSA) but not charges for school at a kindergarten or higher grade because those are not primarily for child care.

Those rulings were included in final regulations issued Tuesday by the Internal Revenue Service updating and clarifying the expenses workers can put on their dependent care FSA accounts, according to a Business Insurance news report.

The latest pronouncement from tax officials mostly confirms May 2006 regulations, the news report said.

Expenses eligible for payment through the dependent FSAs include: day camps, preschool expenses (including food ), fees paid to an employment agency to obtain the services of an au pair, and the cost of bus service that delivers a child to a day care facility.

The worker’s cost of driving his or her child to the day care facility is not reimbursable through an FSA, according to the tax agency. In addition, dependent care expenses related to children in two-parent families in which only one parent works cannot be covered.

Only a small percentage of employees are eligible to make contributions to dependent care FSAs because of federal restrictions – only expenses for children younger than 13, according to the report.