Question

TAXES AND FSA

Forum|Forum|2 years ago
February 7, 2024
1 reply
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IS IT BETTER TO USE ALL OF YOUR DEPENDENT FSA FUNDS OR CARRY THEM OVER? DOES IT AFFECT YOUR TAX RETURN AMOUNT ONE WAY OR THE OTHER? I UNDERSTAND THAT UNUSED FUNDS ARE FORFEITED BUT I WILL USE THEM BEFORE I LOOSE THEM, MY QUESTION IS WHEN FILING MY TAX RETURN IS THERE A DIFFERENCE WHEN IT COMES TO THE AMOUNT THAT YOU PUT FOR UNUSED FUNDS? SO, SAY IF I PUT THAT I HAD $500 OF UNUSED DEPENDENT FSA FUNDS DOES IT AFFECT THE AMOUNT OF MONEY THAT I GET BACK ON MY TAX RETURN COMPARED TO PUTTING IN $0 FOR UNUSED DEPENDENT FSA FUNDS?

B

BillM223

To answer your question simply, so long as funds are used or are carried over, it does not affect this year's tax return.

Any FSA funds for Child and Dependent Tax Credit (found in box 10 on your W-2) that are not used and are not carried over to the following year, will be added back to your income in the current year, that is, you will pay tax on it.

This is because the amount in box 10 was removed from box 1 (Wages) before the W-2 was printed. Hence, any unused amounts have to be added back to income.

Note, you may want to check our employer's rules for the FSA, as to how much can be carried over.

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