topic My wife and I contribute to a dependent care FSA. Why does my refund go down by $600 when I add this from box 10 of her w-2? in Retirement tax questions

My wife and I contribute to a dependent care FSA. Why does my refund go down by $600 when I add this from box 10 of her w-2?

bcannon171 — Wed, 17 Mar 2021 19:13:50 GMT

Re: My wife and I contribute to a dependent care FSA. Why does my refund go down by $600 when I a...

WendyN2 — Wed, 17 Mar 2021 20:54:53 GMT

Box 10 on your W-2 form should indicate the total annual amount of your Dependent Care FSA deductions. When completing your tax return, you will need to attach a Child and Dependent Care Expenses form (Form 2441 for a 1040 return; Schedule A for a 1040A return). One possible reason that the refund "decreases" is that it might be affecting your child care credit. Try going through the whole program and see if the calculations altogether balance out. Sometimes if you're not done with the whole section the amount showing as a refund/amount due at that point in time is not what the end result will be.

Re: My wife and I contribute to a dependent care FSA. Why does my refund go down by $600 when I a...

Cruzin221 — Thu, 10 Mar 2022 02:31:50 GMT

i am seeing the same thing. I do not understand why a non-taxable field is reducing our refund. Even after i complete form 2441, the refund does not come back to the pre-field amount.

Re: My wife and I contribute to a dependent care FSA. Why does my refund go down by $600 when I a...

DawnC — Thu, 10 Mar 2022 03:14:56 GMT

When you first enter the amount in Box 10, it will generate tax. The money in your FSA account is not tax-free unless you spend it on qualifying care, so it starts out as taxable. But after you enter all of your childcare expenses (and providers' SSNs or EINs), the income becomes non-taxable. Then if you have additional expenses above what was in your FSA, you may qualify for the Child and Dependent Care Credit as well.

Go back through the Child and Dependent Care interview section to make sure you have entered your expenses. The FSA funds will be non-taxable once those details are entered. How do I get to the Child and Dependent Care Credit in TurboTax?

You can also view Part lll of From 2441 to see your Box 10 FSA funds excluded from tax on Line 25.

@Cruzin221