Okay....closer. Here is the whole back posts in a lump:
We contributed to dependent spending (FSA) for 2020 through husband's work and is noted on his W-2 box 10 for $5,000. We carried over, in the plan grace period $2,500 from 2019. All funds ($7,500) were used in 2020 to pay for preschool tuition.
We only have one income and AGI is too much so we do not qualify for child and dependent care credit, so Turbotax kicks me out of the interview as also not full time student or disabled and does not allow me to enter expenses.
Turbtax then adds the FSA funds of $5,000 to taxable income on line 1 of 1040. We used the 2020 FSA - $5,000 and 2019 FSA - $2,500 to pay for preschool tuition expenses in 2020. We were under the impression that FSA fund were pre-tax and only need to have qualified expenses for the funds to pay out, which preschool tuition is a qualified expense. So from past posts we are finding out that there is more qualifications needed to make FSA spending account beneficial otherwise it is taxable…..correct? So basically, in our situation the FSA funds are taxable…correct? Why can’t the qualified expense be offset by the FSA funding similar to a Medical FSA account? And why is it not asking me about the carryover FSA funds from 2019, which is on Form 2441? Wouldn’t those be taxable too? You mentioned the funds would be forfeited, but we used the funds to pay 2019 expenses it just happened in Jan 2020.
Thank you for your assistance.
