IRS Issues Proposed Regulations Affecting Dependent Care Flexible Spending Accounts

The U.S. Internal Revenue Service (IRS) recently released proposed regulations that affect the benefits that employer-sponsored Dependent Care Assistance Programs (DCAPs) can provide and the types of expenses that Dependent Care Flexible Spending Arrangements (FSAs) can reimburse. These regulations clarify the types of expenses that qualify as "dependent care assistance," as well as the individuals for whom expenses can be reimbursed. They also provide guidance and specific examples on what constitutes an employment-related expense. The proposed regulations will not become effective until the IRS publishes final regulations, but an employer or taxpayer may choose to apply the proposed regulations now.