In the rush to grab last-minute tax deductions for this year, working parents should be careful not to overlook a program that could provide an important benefit next year: the income set-aside program for dependent care.

A parent fortunate enough to work for a company that offers a "salary reduction account" or "reimbursement account" can have some of his or her pay set aside tax-free to pay for child care. The money, which is taken off the top of a paycheck before taxes are calculated and thus reduces taxable income, can be used to pay such costs as day-care center tuition, day camp, wages and certain benefits for a sitter.

Although federal law has allowed reimbursement accounts for many years, companies have been slow to establish them. However, a series of Internal Revenue Service rulings and last year's Tax Reform Act have clarified many of the uncertainties surrounding the program, and benefits consultants say a growing number of companies are signing up.

Employes who have young children should check with their employer's benefits or personnel offices to see if the program is available. It's important to act at once because the plan requires a "pre-election," meaning you have to sign up before Jan. 1 or wait six months or even a year to enroll.

In most cases the plan may also be used for expenses relating to care of an elderly dependent, and some companies allow similar accounts for employes to pay health care expenses.

The child care program works this way:

The employe estimates what his or her child care expenses will be for the coming year -- up to a ceiling of $5,000 for a couple filing a joint tax return -- and gives that number to the company's benefits administrator. The administrator arranges for the company to deduct an equal portion of that from the employe's pay each period.

The employe then proceeds to pay his or her bills as they come due. Then he or she submits the receipts or canceled checks to the administrator and is reimbursed completely as long as the expenses qualify.

Qualifying expenses include not only day-care centers and sitters, but also after school programs and day camps -- as long as their primary purpose is child care. Benefits such as health insurance for a sitter also are reimbursable.

Such costs as meals and transportation to a day-care centerIt's important to move at once because the plan requires a "pre-election," meaning you have to sign up before Jan. 1.

do not qualify, and, thanks to a recent change in the law, neither does overnight camp.

In addition, the plan applies only to children under 15, and the set-aside total may not exceed your pay or you spouse's pay, whichever is lower. Thus, if one spouse earns $4,000 for the year, the set-aside ceiling is $4,000 instead of $5,000.

The program does have one significant risk: if you overestimate your expenses and more money is taken from you pay than you can use, you forfeit the excess. "It's use it or lose it," said Frank McArdle of the Employee Benefit Research Institute here.

And what if an employer doesn't have a plan? Under the tax code, all working parents are eligible for a tax credit toward their child-care expenses. Indeed, in the past this credit has been more beneficial to many workers, particularly lower-paid ones, than the reimbursement account.

However, changes in another tax benefit, the earned income tax credit for low-income people, have altered the equation, according to benefits consultants, so that at most income levels the reimbursement account will be better. Calculations by the Washington office of Towers, Perrin, Forster & Crosby indicate that at almost all income levels the salary reduction plan outperforms the child care credit. However, Deborah Hrouda of Towers Perrin noted that the calculations "are very complicated, so the chart may not be right for everyone."

For parents whose child-care expenses exceed $5,000, it is possible to use both the reimbursement account and the tax credit. Thus, if your qualifying expenses run, say, $7,000, you are allowed to use the full $5,000 reimbursement and apply the credit to the remaining $2,000. For upper-income parents, the credit is applicable to only 20 percent of qualifying expenses, noted Christine Seltz of Hewitt Associates, a consulting firm based in Lincolnshire, Ill., "but it still may be worth a couple of hundred dollars."

In one of those late-night deals for which Congress is so well-known, conferees working on the deficit reduction package last week voted to repeal the "phantom income" tax on mutual fund shareholders.

The Tax Reform Act of 1986 had required that funds designate a portion of their expenses as the cost of providing investment advice. This cost would have been deductible to the shareholders, but not to the fund itself. Thus, the fund would have pretended that it had given its shareholders additional income and then computed the expenses for the holders to deduct. Unfortunately for the shareholders, those deductions fell into a category that could be taken only to the extent they exceeded 2 percent of the taxpayer's adjusted gross income.

While the outcry from the industry and shareholders had found sympathetic ears in Congress, repeal was stymied by the conferees' agreement to do nothing that cost the government money. But late last Sunday night they evidently decided they could live without the $250 million the tax would have raised, and the repeal was revived. So mutual-fund shareholders can relax: they will be taxed only on their real income.