Thank you for your answer. I have a doubt though when it comes to comparing the IRS Dependent Care Credit versus the Dependent FSA:
-The Dependent FSA allows me to put up to $5,000, which I will surely spend at my present spending rate of $1000/mo ($12,000yr). Under this scenario, I'll "legally" deplete my DFSA in 5 months
-The Dependent Care Credit only gives back 30% of my expenses, up to $6,000, for someone like me with 3-kids. Under this scenario, I'd need to spend $5,000/0.3=$16,667 for getting a credit of the magnitude of my D.FSA, or $6,000/0.3=$20,000 for the full amount of the credit.
My questions are:
1. Knowing that I'll only have $12,000 in child care expenses, am I breaking the law by depleting my $5,000 FSA when the IRS Child Tax Credit clearly states that I'd need to spend $16,667 to get a credit of that amount?
2. If not, how are the DFSA contributions accounted for in my tax return that would make it exempt from this requirement.
3. Related to DFSA vs IRS C&DCC questions 1 & 2, what if the combined wages of one spouse throughout the year fall short of the $5,000 deposited to the DFSA by the higher earner (my wife does direct sales and it's quite passive an income)? What impact would this have in the tax return since all the DFSA money was spent by month #5 (before knowing direct sales would be lag by so much)?
