Do we pay tax on forfeited dependent care FSA?

Forum|Forum|7 years ago
June 6, 2019
1 reply
713 views

I put $1600 into a dependent care FSA (and that amount was reported in box 10 of my w2) in 2017 but only ended up spending $770. Turbo tax appears to have me paying tax on the remaining $830 but that money was forfeited back to the employer as the plan has no carryover. Originally my w2 was blank in box 10 and I left off my dependent care expenses so as not to get a double benefit, but I received a corrected w2 with the $1600 in box 10 and so added the $770 that was spent on child care. My refund is now lower than when child care was out of the picture so I’m pretty sure it’s taxing that $830. Is there a place to put in that the $830 was forfeited or am I stuck paying tax on that money?

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KarenJ2

Level 13

TurboTaxAnnette B had a good answer for you.

You do not owe tax on Flexible Spending Arrangement. You do not need to enter information regarding your unused FSA funds for dependent care.

A Flexible Spending Arrangement (FSA) is a special account you set up with pre-tax contributions to use for medical or dependent care expenses. These contributions are not included in your taxable wages reported on Form W-2. As expenses are incurred you can pay from or be reimbursed from your FSA account.

Amounts contributed to an FSA are not subject to federal income tax, Social Security tax or Medicare tax, allowing your medical or dependent care expenses to be paid with pre-tax rather than after-tax income.

[Edited 2.16.18 / 3:17 pm]

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dan-ciskeyAuthor

Level 2

Follow up: it seems the only practical way to do what you’re saying would be to change the amount I enter for box 10 to $770 from $1600. This seems questionable, since $1600
Is being reported to the IRS. Is that the way to do it?