A higher dependent care FSA limit sounds like a straightforward win for employees. But what happens when federal and state tax rules don’t line up?
In this episode of Comply on the Fly, we explore the potential state tax implications of the dependent care flexible spending account increase from $5,000 to $7,500. While the higher limit allows employees to set aside more money tax-free at the federal level, state tax treatment may differ, creating questions for employers and employees alike.
For employers that adopted the higher limit, updating the benefit is only part of the equation. This episode covers why employee residency matters, what to communicate about potential tax consequences, and where payroll coordination and W-2 reporting come into play.
Tune in for a practical look at the details employers could overlook and the questions worth asking before W-2s go out.
Additional Resource:
For a closer look at how state tax differences affect dependent care FSA contributions, read our compliance alert, including Wisconsin-specific considerations and next steps for employers.
Please Note: This podcast and the contents herein do not constitute legal advice. Seek the advice of counsel for any benefit compliance related implementation guidance or strategy.
Find all Comply on the Fly episodes, everywhere you stream
