Excess Dependent Care FSA (DCFSA) Contributions for 2022

[chameleon]

The 2022 Dependent Care FSA (DCFSA) limits were $5000 per household. My wife and I made a mistake and put $5000 for each of our employers, thus providing us with $10,000 in total DCFSA benefits ($5000 in excess or $2500 each in excess). How do we correct this? We were told mid-year that the FSA elections are irrevocable so we had to use the full $10,000 and then were advised to correct it on our taxes utilizing Form 2441.

On this forum I have seen two responses and am unsure how to proceed:

1) This is automatically reported on your W2 and then TurboTax makes the necessary calculations on Form 2441, so there's nothing to do manually.

2) In the "Wages and Income" section scroll down to "Less Common Income" and select "Miscellaneous" and then "Other Reportable Income." Answer "Yes" and for description enter "Excess DCFSA." Then for our case, my wife and I would each enter $2500 for an amount in the boxes.

Which option is the correct way to proceed?

Thank you.

[CatinaT1]

If you both have $5000 in box 10 of your w2's and you entered them as such (which you should), and you enter Dependent Care expenses of at least $5000, TurboTax will handle this, and you do not need to do anything additional. You will see $5000 on line 1e of your 1040 form. The excess $5000 becomes taxable income.

[chameleon]

Thank you for your response. I wish it were that easy. To make things complicated, my W2 box 10 does show $5000 but my wife's shows $833, which is so bizarre and we are trying to unravel as to why that would have happened. We added up the DCFSA reimbursements received on her account and they add up to exactly $5000, so we did get paid that money in full, so not sure why her W2 does not show this clean and exact amount of $5000, which is what she elected at the start of the year.

On Form 1040 1e, I see that $833 amount. So if we are still required to add excess income to our tax return, would we be adding $10k-$5k-833=$4167? It is technically $4167 that is still unreported income?

[BillM223]

$833 is $10,000 divided by 12 (months). That really doesn't answer the question of where it came from, but it might trigger someone's recollection of doing that.

If your wife indeed had $833 and not $5000 in box 10, then your joint excess is $833. She didn't exclude a $5,000 to be in excess (no matter what her intentions were).

Make sense?

[chameleon]

Interesting on the math, but unfortunately it doesn't help trigger anything.

Sorry it doesn't exactly make sense. We each elected $5000 and each got reimbursed $5000 each. We can see this from our statements and money received in our account. Of course this is $10k and thus $5k too much for 2022. If our joint excess is $833, then $5000-833=$4167 must be accounted for somewhere else. Not sure how to sort this out going forward. If I go with Option #2 in my original post, do I add Other Reportable Income as $5k or $4167?

Is it possible that part of DCFSA is accounted for in Box 10 on a W2 and part in Box 1? Not sure why this would happen, but reaching for possibilities. Perhaps it is company accounting and the nuances of how they do it?

[Cynthiad66]

The only reason I see for including some of it in box 1 of the W-2 is if your employer contributed to the DCFSA.  Not likely!

In my opinion, $5,000 should be reported as Excess or Other Reportable income.

A Flexible Spending Arrangement (FSA) is a special account you set up with pre-tax contributions to use for medical or dependent care expenses. These contributions aren't included in your taxable wages reported on Form W-2. You can pay from or be reimbursed from your FSA account as you incur expenses.

Hope this helps.

@chameleon

[chameleon]

Miraculously we provided evidence and the company corrected the W2 to reflect the proper amount in box 10. Now it seems Form 2441 took care of itself, computing the same amount for Federal Tax Due had I added the missing $4167 I discussed for Option 2 in my original post. Thank you all for your help!