I entered the amount my wife and I spent on child care in 2020 (so that we could work) into TT and TT reported that we had a Child and Dependent Care Credit of zero. However, the amount of our federal refund increased by about $1300 from where it was before I entered the information, and our state refund increased by about $350. Of course I am pleased by this good news, but can this be correct? Why are our refunds increasing when our credit is zero?
If it matters, I think the reason that our credit is zero is that we have only one child, so that our maximum qualified expenses are $3000, and I created a Dependent Day Care Flexible Spending fund through my employer of more than $3000 for 2020.
