$5000 for child care expense through my employer

[brian193]

So, questions.  I work for a company that has many "legal entities" it owns.  I worked for Merrill for 6 months, then transitioned roles to Bank of America July 1.  So 6 months in each role.  This is one company, but the change means i get 2 W2s.  

My Merrill W2, excludes the $5000 in child care reimbursement from taxes, and everything over, got added to box 1 on my W2 (and was taxed appropriately through payroll).

My BOA W2, (even though it is a separate EIN) understands that the $5000 was already excluded from taxes, so all of my child care reimbursement (was taxed appropriately through payroll) is added to box 1 on my W2.

Turbo tax, thinks that since it is a new company, that the BOA is also holding back $5000 from box 1 on my W2, so they are adding it back into my wages.

Basically i am getting taxed twice on that $5000.  How do i account for this on my turbo tax return.

Thank you in advance!

[MaryK4]

If you have the Dependent Care Benefits in Box 10 of your W2, you will have to go to the Child Care section in Deductions and enter the qualified expenses ($5000), then TurboTax will remove it as taxable income.  

[brian193]

yes, i understand that part.  I can do that for the $5000 that Merrill listed as not taxable.

But even if i do $10,000 (to account for Merilll and BOA) it only allows a $5000 deduction.

My question is more around what i posted.  BOA adding the $5000 to box 1 on my W2, but turbo tax thinks they didnt.  The issue is Turbo tax thinks Merrill and BOA are two separate companies, but they are not.

[Opus 17]

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@brian193 wrote:

yes, i understand that part.  I can do that for the $5000 that Merrill listed as not taxable.

But even if i do $10,000 (to account for Merilll and BOA) it only allows a $5000 deduction.

My question is more around what i posted.  BOA adding the $5000 to box 1 on my W2, but turbo tax thinks they didnt.  The issue is Turbo tax thinks Merrill and BOA are two separate companies, but they are not.

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If you have 2 W-2s, and both of them list $5000 in box 10, then you need to get one or both W-2s corrected.  Even if you diddle Turbotax to make it look right, the IRS will come after you because the W-2s make it look like you received $10,000 in excluded day care benefits. 

[brian193]

Yeah, that is the question.  The W2s dont need to be corrected, they are correct.  Turbo tax should have a way to understand affiliate businesses.  I received the reimbursement, so they have to show it.  I wish they would have just excluded from box 1.  but if they did, they are breaking IRS rules, as $5000 has already been excluded, and they cannot legally exclude more just because turbo tax doesnt understand

[Opus 17]

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@brian193 wrote:

Yeah, that is the question.  The W2s dont need to be corrected, they are correct.  Turbo tax should have a way to understand affiliate businesses.  I received the reimbursement, so they have to show it.  I wish they would have just excluded from box 1.  but if they did, they are breaking IRS rules, as $5000 has already been excluded, and they cannot legally exclude more just because turbo tax doesnt understand

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You're going to have to find a smarter accountant than me.  If you work for two legally separate businesses and get 2 W-2s, then you should not have the same DCB listed twice.  

I think your BOA W-2 is wrong.  If the $5000 is added to your box 1 wages, it should not be listed in box 10.  Or, if they list the DCB in box 10, they should not also add it to box 1.

There is no procedure in the forms or instructions for the dependent care benefit that will allow you to correct this situation with your existing W-2s.  If you file as-is, you might be able to alter your entries to pay the correct tax (I can suggest 2 ways), but the IRS will come after you for the discrepancy.  You would then have to explain to them what the problem was and how you fixed it, and hope you can convince them.

It would be much better to get a corrected W-2.

[brian193]

Box 10 specifically states anything over the allotted amount will also be added to box 1.  So that part is pretty standard.

So if i work for 1 company, and get 9000.  9000 is in box 10, and 4000 gets added to box 1 on the W2.  That is standard procedure.  So things being in both places is not only normal, but required.  The issue only comes up because  i have 2 W2 from 1 company.  if they were 2 separate companies, i wouldnt have the issue.

[Opus 17]

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@brian193 wrote:

if they were 2 separate companies, i wouldnt have the issue.

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I think that's basically the issue.

Suppose you worked 6 months for Bank A, and received $8000 in day care assistance.  Box 10 would show $8000 and box 1 would be increased by $3000.

Then you worked 6 months for Bank B, and they also provided generous day care assistance in the amount of $7000.  Box 10 would show $7000 and box 1 would be stepped up by $2000.

In this case, because you received $10,000 in dependent care benefits and the maximum exclusion is $5000, Turbotax should add another $5000 to your taxable income, because--since you used up the $5000 tax free amount at Bank A--the entire benefit at Bank B should have been taxable.

If I understand your problem, Merrill gave you (let's say) $8000 in dependent care assistance, reported $8000 in box 10 and added $3000 to box 1.  Then you got a separate W-2 from BOA.  BOA provided $7000 of dependent care assistance and reported it in box 10, but also added the entire $7000 to box 1, because they coordinated with Merrill and knew you exceeded your limit. 

Your tax return would be correct if BOA had not added the DCB to box 1, because any tax program would make that amount taxable automatically.  Your tax return would also be correct if BOA had simply added the dependent care amount to box 1 and left box 10 blank.  And really, BOA did not provide you with any tax-free dependent care benefit because you used up the tax-free amount at Merrill. 

Assuming your assessment of the situation is correct, you can fix this by 

a. leaving your BOA box 10 blank in Turbotax

b. reducing your BOA box 1 amount by $5000

c. filing a "substitute W-2 form" to report your BOA W-2 using the values that should be there rather than what is there (a blank box 10).

Any of these methods is likely to get you a letter from the IRS assessing income tax on the missing $5000 unless you can explain yourself to their satisfaction.  You also aren't supposed to use the substitute W-2 form until you have requested a corrected W-2 and waited a reasonable amount of time, or been refused. 

[brian193]

Yes, that is my issue to the tee.  and the numbers are almost spot on by chance.  Merrill is owned by Bank of America, they are 1 company.  i am seeing if they can adjust box 1, but i dont think they will, and i am at a loss for what to do next.  Thanks, for looking at it with me, even though i dont have an answer, it still helps.

[Opus 17]

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@brian193 wrote:

Yes, that is my issue to the tee.  and the numbers are almost spot on by chance.  Merrill is owned by Bank of America, they are 1 company.  i am seeing if they can adjust box 1, but i dont think they will, and i am at a loss for what to do next.  Thanks, for looking at it with me, even though i dont have an answer, it still helps.

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From your story, all the box 1 amounts are correct.  You need the box 10 amount removed from the second W-2. 

[Mike9241]

your situation raises a question. if both are one employer you can not claim any excess FICA if the total of your FICA wages are over $147,000. you can only do that if they are separate employers.