Category: Compensation and
Employee Benefits Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com Taxpayers are married filing jointly. Both spouses are employed. Both employers have dependent care assistance plans. The limit on excludible dependent care assistance under Section 129 is $5,000 per year. The question is whether the limitation is A) per employee, such that a married couple such as the taxpayer's in this example could exclude $10,000; or B) per taxpayer, such that a married couple filing jointly (i.e., as one taxpayer) could exclude only $5,000. The limitation language in the statute, IRC Section 129(a)(2)(A), is somewhat fuzzy. The language of the portion of the statute dealing with the exclusion in general is couched in terms of a benefit provided by an employer to an employee. The limitation language simply says "the amount which may be excluded is $5,000". Is this per employee or per taxpayer? The limitation is $5,000 or $2,500 for married individuals filing separately. Normally, a married filing separately limitation in this context indicates that the overall limitation, $5,000 in this case, applies to married taxpayers filing jointly as a unit. In other words, the implication is there is one $5,000 limitation per taxpayer, not per employee. There are no regulations. The instructions to Form 2441 are not helpful. The committee reports surrounding enactment of the limitation are not helpful at all. There are no rulings, cases, announcements, etc. With nothing more to go on, I would conclude that there is only one $5,000 limitation for married taxpayers filing jointly. The literal language of the statute supports this interpretation. Out of curiosity, I "dummied up" a return on Lacerte with two married taxpayers each of whom received $5,000 of dependent care assistance. For what it is worth, the system allowed an exclusion of only $5,000. |
