Dependent Care FSA / Form 2441 Issues

[inverness]

Please tell me if I'm wrong on any of the following:

1. If I use a Dependent Care FSA, my spouse is the one needing dependent care, and he does not work because he is disabled, the maximum amount from my FSA that I can exclude from taxes is $3000 ($2000 less than the amount I could exclude if I were single or if I were part of an able-bodied working couple taking care of a child or other dependent). Thus, if I contributed $5000 to the FSA, $2000 will end up being taxable when I fill out Form 2441.

2. If my Dependent Care FSA has a grace period where I incur expenses during the first 2 1/2 months of the following calendar year, the total amount I can exclude from taxes during that calendar year remains unchanged. So if my excludable limit is $3000 (per #1), and I incurred/claimed $2000 in year 1, $1000 during the grace period in year 2, and $3000 during the rest of year 2, I would end up owing taxes on $1000 in year 2 even though my FSA allowed me to incur $4000 of expenses during one year.

3. TurboTax Premier has no step-by-step instructions that take me through filling out Form 2441 for a Dependent Care FSA where my spouse is the one receiving care (since it does not allow me to identify my spouse as a "dependent"). Instead, I have to go into Form 2441 in the forms view and fill it out manually.

These all seem wrong to me but I cannot find any contrary information or guidance.

[KarenJ2]

Although you cannot list your spouse as a dependent, TurboTax steps includes questions about your spouse and disability.

The size of your credit is based on how much you spend for child and dependent care, as well as your income. TurboTax guides you through the process of figuring your credit and fills in the proper form for you, but in general, it works like this:

• Add up the total amount of your care expenses that qualify for the credit. The maximum amount of care expenses you're allowed to claim is $3,000 for one person, or $6,000 for two or more people.
• If your employer gives you money to pay child care expenses, or if you have money withheld from your pay on a pre-tax basis, you must subtract this money received from your allowable expenses.
• Compare your claimed expenses with your earned income and, if you're married, your spouse's earned income. Take the smallest of all these amounts. These are your "allowable expenses."
• Your credit is a percentage of your allowable expenses. That percentage ranges from 20% to 35%. The higher your income, the smaller your percentage, and therefore the smaller your credit. But as Becker notes, there is no upper limit on income for claiming the credit.

As your husband is disabled, your allowable expenses are limited to his income ,$3,000, as he is only allowed $250 per month as calculated income if he is disabled.  That is what is affecting your unused FSA

Unless the law changes, you may consider not signing up for FSA for dependent care and just claim the credit on  your tax return.

[inverness]

I don't know whether TurboTax would ask the right questions to get the credit, but it didn't ask the right questions last year to fill out the dependent care FSA part of Form 2441 (Part III). I went through all the questions last year and my Form 2441 ended up incorrectly stating that I hadn't incurred any expenses so I never learned until by accident this year, when I was browsing the web outside of Turbotax, that I needed to identify the care provider and that there was an earned income cap. I looked for the questions this year to fill that  part out in the step-by-step view but there weren't any, and I even called TurboTax for help, and the person I talked to also couldn't find anywhere in the step-by-step that helped to fill this out. I had to fill it out manually.

[LeonardS]

TurboTax does ask step by step questions to complete Form 2411.  With TurboTax open enter child care credit in the search box.  Then select Jump to child credit in the results window.  TurboTax will now ask you step by step information to complete your Form 2441.