Should Dependent Care benefits (FSA) be counted in my taxable (federal) income? Under what circumstances would it count as income?

[Anita01 · Accepted solution]

Typically, this occurs because you have not yet entered your child care expenses under the credit section to show that the amount was used for purposes eligible to make the FSA amount nontaxable.

[keyursoni]

Hi

I just filed my taxes and then went back to check Form 1040 and then also checked Form 2441 Part III Dependent Care benefits.  I show a taxable amount of $10,500 for the year 2021.  And this is the same thing for the year 2020 where $5,000 was showing as taxable.

Why am I paying taxes on it when i have properly submitted receipts to get reimbursement from the company for these expenses.  Am I screwed because I filed my taxes already?  Please advise what is my recourse here and what should I do?

I thought Turbo tax was a good software that takes care of these their customers.

Regards

Keyur 

[AmyC]

On the 2441, the child care expenses must be listed on line 16. Otherwise, your dependent care benefits do become taxable income. You will need to amend last year and this year and include  the child care provider information as required in part I.

I recommend you e-file an amended return for TY 2021 as soon as the original return is completely finished- all payments have cleared the banks, E-filing will shorten the refund delay. The 2020 will need to be mailed in. Since you must paper file, tracking is recommended. Please:

• Save a copy of the original return before doing an amended return.
• See how to file an amended return.
• Follow your amend at track an amended return 
• Here is a great FAQ to show the math for amended returns. 

In addition, you may need to file a state return. 

• See how at  I need to amend my state return.
• Can I e-file my amended state return? 

Reference:

Form 2441 

Instructions for Form 2441 (2021) | Internal Revenue Service

@keyursoni