Dependant Care FSA

[mairp317]

I received $5,000 in Dependant Care FSA from my employer, and thus it shows up in Box 10 of my W2. I used all of these funds for qualified expenses during 2023. However, it's showing up as taxable income on my 1040 and I can't figure out how to fix it. How do I correct this?

[mairp317]

Based on what I can see, I should have $5,000 showing under line 16 on Form 2441, but it shows $0. How do I add these expenses in?

[Mike9241]

did you show what you spent on the dependent(s) worksheet(s)?

did you list the providers and the amount spent for each on the 2441?

the amount that can be excluded is limited to the smallest of the following:

1) the DCBs received

2) the qualified expenses incurred

3) your earned income or if you're married your spouse's, if less

4) $5,000($2500 if married filing separate) 

other requirements do you have a qualifying person and did you spend the full $5000 on qualifying expenses:

Qualifying Person(s)
A qualifying person is any of the following.
1. A qualifying child under age 13 whom you can claim as a
dependent. If the child turned 13 during the year, the child is a
qualifying person for the part of the year he or she was under
age 13.
2. Your disabled spouse who wasn't physically or mentally
able to care for themselves and lived with you for more than half
the year.
3. Any disabled person who wasn't physically or mentally
able to care for themselves who lived with you for more than half
the year and whom you can claim as a dependent or could claim
as a dependent except:
a. The disabled person had gross income of $4,700 or more,
b. The disabled person filed a joint return, or
c. You (or your spouse if filing jointly) could be claimed as a dependent on another taxpayer's 2023 return.

[mairp317]

See responses to your questions:

did you show what you spent on the dependent(s) worksheet(s)? No, how do I do that within Turbotax?

did you list the providers and the amount spent for each on the 2441? Again, Turbotax didn't give me an option to do this.

the amount that can be excluded is limited to the smallest of the following: Correct me if I'm wrong, but my wife not working has nothing to do with the FSA funds being taxable. I'm not looking for the dependent care tax credit, just want to make sure my FSA are not taxable.

Thanks.

[BillM223]

"Correct me if I'm wrong, but my wife not working has nothing to do with the FSA funds being taxable." - your wife not working has everything to do with the FSA amount being taxable.

"I'm not looking for the dependent care tax credit, just want to make sure my FSA are not taxable." - Unfortunately, the FSA credit calculations are intermixed with the dependent  care credit, all on form 2441.

@Mike9241 gave an excellent answer above. You cannot take the box 10 (W-2) amount as an exclusion to income, unless you show that the expenses are qualified in the dependent care interview.

But because your wife was not working, you don't qualify for this anyway, so TurboTax did not show you the interview. Next year, unless your wife if working, you should not ask your employer to defer some of your salary to the FSA.