ASE Reimbursment Q&A's

Q. What is a “qualified dependant”?

A. A qualified dependent is defined according to the California Department of Education under which school districts must admit children if they will be five years of age on or before December 2 of the school year. Only children who are under the age of five on or before December 2 in the academic year in which reimbursement is sought will qualify for the program.

Q. How is “child care provider” defined?

A. A licensed child care provider with a valid tax ID. If care is provided in a day-care center, the center must charge a fee. If the center cares for six or more dependents who are not residents, it must comply with all state and local licensing laws and applicable regulations.

Q. How will the reimbursement be taxed?

A. The reimbursement will be subject to Federal tax withholding at 25% and State tax withholding at 6%. Defined Contribution Plan (DCP) and Medicare will be deducted if applicable.  Reference: Federal Regulations 31.3403(g)-1.

Q. How will I receive my reimbursement?

A. CAPM 700.411-J.2 details the process of reimbursement for childcare expenses on the Santa Cruz campus.

Q. When the DepCare Program becomes available to ASEs in January 2009 (under the same article of the contract), will the $5,000 DepCare limit be reduced by amounts reimbursed under the ASE program?

A. No. Because the reimbursements paid to ASE employees under the Child Care Program are treated as additional wages, such reimbursements will not reduce the maximum pre-tax amount that can be deducted from the employee’s paycheck under the DepCare Program.

Q. Will the child care reimbursement affect my eligibility for Financial Aid?

A. It is possible that the child care reimbursement might impact eligibility for Financial Aid.  It is the responsibility of the ASE to inform the appropriate agencies and offices of the receipt of such child care reimbursement.

Q. Why is the child care reimbursement taxable?

A. In order for the child care reimbursement payment made by an employer to be non-taxable, it must be paid pursuant to a ‘dependent care assistance program’ that meets certain requirements set forth in the Internal Revenue Code. The DepCare Program meets these requirements, which is why reimbursements made under DepCare are not taxable to the employee. The ASE Child Care Program, however, is not structured to meet dependent care assistance program requirements; therefore, the reimbursements received by eligible ASE employees under this program are treated by the IRS as additional wage income.

Q. Can I claim the child care credit on my tax form?

A. Potentially yes. Even though the reimbursement received under the ASE Child Care Program represents taxable wages to the employees, the amounts paid by the ASE employees for child care services may be eligible for the ‘dependent care services’ tax credit set forth in Section 21 of the Internal Revenue Code. Unlike tax deductions that merely serve to reduce the amount of taxable income against which the tax percentage is applied, a tax credit is a dollar-for-dollar reduction in the taxpayer’s tax liability and is therefore significantly more valuable than a tax deduction.

The amount of the dependent care services tax credit that can be claimed is determined by multiplying the amount paid for the child care services during the year by a sliding scale percentage depending on the individual’s adjusted gross income as illustrated in the following chart:

Adjusted gross income
         -----------------------------------------------------------
         Over                   But not over   Applicable Percentage
         -----------------------------------------------------------
         0                           $15,000               35%       
         15,000                    17,000               34        
         17,000                    19,000               33        
         19,000                    21,000               32        
         21,000                    23,000               31        
         23,000                    25,000               30        
         25,000                    27,000               29        
         27,000                    29,000               28        
         29,000                    31,000               27        
         31,000                    33,000               26        
         33,000                    35,000               25        
         35,000                    37,000               24        
         37,000                    39,000               23        
         39,000                    41,000               22        
         41,000                    43,000               21        
         43,000                    No limit              20         

Please note, however, that the amount of the credit cannot exceed $3,000 for one child or $6,000 for two or more children in any single tax year.  The dependent care services tax credit is subject to a number of different requirements that are explained in IRS Publication 503, which can be found on the IRS website at:     

http://www.irs.gov/app/picklist/list/publicationsNoticesPdf.html

You should consult with your tax advisor in determining whether you are eligible to claim this credit. 

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CHILDCARE PROGRAMS

Participation in Campus Childcare Programs

ASEs may participate if eligible in campus childcare programs, if any, including subsidies and other financial assistance. Information regarding available campus childcare programs can be found at: http://housing.ucsc.edu/childcare/index.html.

Childcare Reimbursement Program

Effective Fall Quarter 2008, each eligible ASE shall receive up to $300 per quarter under this program for expenses incurred during the ASE’s appointment period in the regular academic year.

Allowable receipts: Receipts from a childcare provider with a valid tax ID or Employee Identification Number (EIN) incurred during an eligible ASE’s appointment. Expenses incurred before the beginning of or after the end of an ASE’s appointment or during Summer Session are not eligible for reimbursement. 

Childcare provider: A licensed childcare provider with a valid tax ID. If care is provided in a day-care center, the center must charge a fee. If the center cares for six or more dependents who are not residents, it must comply with all state and local licensing laws and applicable regulations.

Eligible ASE: A registered student with at least a 25% ASE appointment who has a qualified dependent.

Qualified dependent: A qualified dependent is a child in the custody of the ASE who is under the age of five on or before December 2 of the academic year in which reimbursement is being sought.  A child is in the custody of the ASE when they can be claimed as a dependent on the ASE’s tax return. 

Reimbursement Process

ASE Employee

At the end of the quarter, or when the maximum reimbursement expense amount has been incurred by the ASE, the ASE downloads the ASE Child Care Reimbursement Form (UBEN 254 form).

The ASE completes the UBEN 254 form, certifies that the appropriate program requirements are met and submits the form and applicable childcare provider receipt(s) to the Graduate Division.

Reimbursement requests cannot be submitted later than the last day of the subsequent quarter, (e.g., reimbursement for fall quarter must be submitted by the end of winter quarter).  If the reimbursement is for spring quarter, the request must be submitted before the first day of the fall quarter.

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