I believe he is referring to amounts in Box 10 on your W-2, for your dependent care benefits. When you enter these amounts, they will show as taxable until you enter the amounts you spent on dependent care on Form 2441. The maximum tax-free funds you can take from an FSA for dependent care is $5K. But TurboTax will calculate the amount of your credit or taxable benefits income when you enter your expenses. To get to the entry screen for the credit,
- In the search field in TurboTax, search for child care credit.
- Select the Jump to child care credit link and we'll take you right there.
You will list the aunt as a child care provider. You will have to enter her SSN in order to get the credit as the IRS wants to know who you paid to provide care to your dependent. She is responsible for reporting the income on her tax return. If you paid other child care providers, you should list all of your child care expenses in this section. You can have multiple providers on Form 2441. If you use FSA funds to pay your child care expenses but don't enter those expenses, you are still paying income taxes on those 'benefits'. So, enter all of your expenses and let TurboTax figure the amount of the credit and/or the taxable amount of your benefits.
What is the Child and Dependent Care Credit?
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