Use It Or Lose It: Parents Set Wages Aside For Child Care. Now It’s At Risk

Norah Perez’s children had been going to day care since they were four months old. That came to an abrupt end this spring when the coronavirus hit and their day care closed.

Like many parents, Perez initially thought it might last a few weeks. Turns out, that was wishful thinking. Now, she could lose some of the money she set aside from her paycheck, pre-tax, to pay for day care. She has $2,200 stuck in what’s called a dependent-care flexible spending account, money that is “use it or lose it” unless Congress or the IRS act.

The pandemic has created an unprecedented situation for working parents who take advantage of this tax benefit. In a year when schools were closed, summer camps were canceled, and day cares have been operating at limited capacity, parents who withheld part of their wages to cover the cost of child care are finding they may not get that money back. That’s the use it or lose it part. Because of the shutdowns, they haven’t racked up the ordinary child care expenses covered by the benefit.