Hi - We wanted to help pay for our nanny's health insurance in order to take advantage of the payment being deducted pre-tax. My question is do we need to pay the premium directly to the insurance in order to qualify as a pretax expense or can we give the check directly to our nanny? We live in Massachusetts. Are there any other regulations we need to be aware of regarding tax issues and paying nanny health care. THanks.

Hi, Steven!

Beware! Since your Dependent Care Flexible Spending Account plan is reporting to the IRS, you will need to make sure you have all of your nanny’s information including name, address and social security number. If you pay your nanny more than $1,500- for the year, you are required to handle, withhold and pay payroll taxes, and provide the nanny with a Form W-2 during January. Keep in mind, the DCFSA limit is $5,000-, so you will most likely reach that amount with the nanny’s pay.

Be informed! Regarding reimbursement from the dependent care flexible spending account, you are eligible for reimbursement of expenses necessary in providing day care for your child so you can work. This means that you may be eligible for reimbursement for such things such as agency fees, employment taxes and health insurance for your nanny.

Be organized! Many companies require you to provide documentation when requesting reimbursement. This means you may be asked to show proof of payment through cancelled checks or receipts, time sheets, and/or insurance policies. When paying for your nanny’s healthcare, you may want to pay the premium directly to the insurance company. For other requirements, be sure to check with the DCFSA benefit plan administrator.

If you have any questions, comments or require additional assistance, please feel free to contact me via email.

Zip Code: 01801

Teri-
Thanks for the reply, but I think you were answering a different question. We do withold taxes, etc and everything is fine in that regard. The specific question relates to us paying for our nanny's healthcare and whether we need to pay the insurance premium directly to the insurance company or if we can pay our nanny directly in order for it to be considered a pre-tax deduction. Thanks

Hi, Steven!

If the health insurance is an employer sponsored health plan (one you set up for your employee) the funds are pre-tax and, from my research, it does not matter whether you pay the insurance premium or you give your nanny a check to pay the insurance premium. However, you should contact the insurance company directly for additional information regarding your insurance plan requirements.

-Teri

Zip Code: 01801