Question

Dependent care FSA and actively-looking-for-work spouse who has rental income.

Forum|Forum|6 years ago
December 5, 2019
2 replies
0 views

I have a Dependent care FSA account of $5000 with my employee and have been claiming reimbursements. However, my wife who has been actively looking for work and have all email records of job applications and interview invitations hasn't been successful in landing a job this year yet. She does have rental income though. Would you please let me know if we are still eligible for FSA? If not, do I have to return the $5000 reimbursement I received to my employee or how should I file tax return to avoid any filing error and pay the correct tax amount? And is there any penalty? Thank you so much.

X

xmasbaby0

Employee

In order to get the childcare credit both spouses have to work and earn income. The "looking for work" part is often misunderstood to mean just seeking employment means you can get the credit. Not so. She has to actually become employed and earn income in order to qualify you to get that childcare credit. If she did not find a job and work, then your FSA funds will just become taxable income. The rental income is passive income and will not help you get the childcare credit. Sorry.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

L

LTVAuthor

Would you please let me know that how I should pay for tax for the Dependent care FSA fund $5000? My employee has not withhold any tax for the $5000 amount. Thank you so much.

X

xmasbaby0

Employee

It will be calculated along with everything else on your tax return, and will affect your refund or amount of tax due at tax time. The software will calculate it when you enter your W-2 with the data that is on it. In other words, you have $5000 of untaxed income now--it will be taxed when you prepare your tax return.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

V

Valebu87

What about if I received unemployment benefits as the spouse that didn’t work this year? Are we eligible for dependant care fsa?

O

Opus 17

Employee

No. While care is "qualified" if one spouse is looking for work, the actual dollar amount of the credit is limited to the income earned from working for the lower-earning spouse. Unemployment compensation is not considered earned income.