Question

Child and Dependent Care Credit - Credit, but amount below Flex Spending

Forum|Forum|4 years ago
February 19, 2022
1 reply
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I have a $10,500 dependent care flex spending account. I entered this information in TurboTax. I then filled out the section on Child and Dependent Care Credit. I entered $10,000. There is a Note that says "You have $10,500 employer-provided benefits. In order to receive this credit, your expense below must be more than this amount. "

The amount I entered was less than $10,500. After I enter this amount ($5000 for each child), the amount listed in TurboTax is still $0 for each child. I assume this is because the total is below $10,500. But here is the strange thing: Despite those numbers being $0, when I entered them it increased by Federal Tax refund by several thousand dollars. Is this right? Seems unlikely since the amount is less than $10,500.

Basically, I have no idea what is going on! Thanks.

ColeenD3

."The amount that the IRS allows per family is $5,000, not per child. "The maximum amount you can put into your Dependent Care FSA for 2022 is "$5,000 for individuals or married couples filing jointly." FSA

You are not entitled to a credit if your FSA pays for your day care. If you contributed over the IRS allowed amount, non-qualified amounts of dependent care benefits will be added back to your taxable income and taxed at whatever your marginal tax rate is.

M

messner8000Author

Sorry - but that did did not answer my question. Could someone else try to respond? Also, the flex spending dependent care amount for 2021 was $10,500 (a one year COVID-related change).

In case my original post doesn't make sense I can rephrase my question as: Since my total dependent care was less than $10,500, and I had a flex spending dependent care account with $10,500, should I just not fill out the Child and Dependent Care Credit Section (because I am not entitled to a child care credit if I paid for child care entirely with tax-free flex spending funds)?.

As it stands now, I entered the appropriate child care costs, and Turbo Tax on the main screen nonetheless lists the amounts as $0, yet my tax due decreased substantially. Something seems wrong....

J

JillS56

You do not have to complete the Child and Dependent Care form if your child care expenses do not exceed what you paid for child care.

You are correct that the amount of FSA for 2021 was increased to $10,500.

FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution. The employer may also contribute.

Note: Unlike HSAs or Archer MSAs which must be reported on your Form 1040, there are no reporting requirements for FSAs on your income tax return. If you have any unused amounts in your FSA, that amount is forfeited, and since you already got a deduction, you cannot deduct the loss. However, for 2021 due to pandemic legislation that aimed to help families with their childcare costs, your employer may allow you to carry-over your entire remaining Dependent Care FSA balance into 2022 and provide a grace period of up to 12 months following the end of the 2021 plan year to use those funds.

In summary, you do not have to report your child care expenses if you used funds from an FSA to pay the expense. There is no reporting requirement than through your W-2 for the FSA funds.

You will want to go back into TurboTax and delete the Child and Dependent Care entries.

To do this in TurboTax Desktop:

Open up TurboTax if not already open
Go to Forms
Scroll down the list to Form 2441
Underneath the Form across the bottom you can select to "print - delete - close" form.
Click on "Delete". This will remove the form from your return.

To do this in TurboTax Online: