MFS return rejected because both claim dependent care expenses on 2241 for same child

[garrett619]

MFS and both spouses contributed $2500 to an FSA.  My wife claims the child as a dependent and I claim him as non dependent for expenses only.  My wifes return was rejected because I already show his SS on 2241 part II.  If I had turbo tax skip part II or delete 2241 it would add in my $2500 as excess contribution (income on line 7 of 1040).  Is my only option to amend my return, overide/delete his info in Part II of 2241 and resubmit?  Can I have dependent care expenses and not have someone listed in Part II of 2241?

[Coleen3]

You can't split the benefits for a child unless you qualify for the Divorced or Separated Parents Rule. In this case, the custodial parent claims the child care, Head of Household filing status and EIC. The non-custodial parent, if given a Form 8332, can claim dependency and the Child Tax Credit.

Children of Divorced or Separated Parents (or Parents Who Live Apart)

In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of the custodial parent. However, the child will be treated as the qualifying child of the noncustodial parent if the rule for children of divorced or separated parents (or parents who live apart)(discussed next) applies.

Children of divorced or separated parents (or parents who live apart).   A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true.

1. The parents:

1. Are divorced or legally separated under a decree of divorce or separate maintenance,
2. Are separated under a written separation agreement, or
3. Lived apart at all times during the last 6 months of the year, whether or not they are or were married.

1. The child received over half of his or her support for the year from the parents.
2. The child is in the custody of one or both parents for more than half of the year.
3. Either of the following applies.

1. The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, seeDivorce decree or separation agreement that went into effect after 1984 and before 2009 , or Post-2008 divorce decree or separation agreement , later.
2. A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2016 states that the noncustodial parent can claim the child as a dependent, the decree or agreement wasn’t changed after 1984 to say the noncustodial parent can’t claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2016. See Child support under pre-1985 agreement , later

[garrett619]

We are married, file MFS for student loan reasons.  From our separate FSA's we both paid for dependent care expenses.  Isn't there a way we can both use those expenses pre-tax? Not trying to take a credit, so I think I just need to fill out Part III of 2241 and leave Part II blank.  The problem was Turbo Tax wasn't letting me and I don't want to overide Part II and have issues with my amended return.

[Coleen3]

Unfortunately, no. That will end up being taxable income to you. If you are going to continue to file separately, change this at work. This is why it is usually a trade-off when you file separately for student loan purposes.
Although there is no one answer since every situation is different, generally filing jointly will give you a bigger refund or less taxes due. When you file separately, your tax rate is higher and you won't be able to claim:

• Student loan interest deduction
• Education benefits
• Earned Income Credit (EIC)
• Child and Dependent Care Credit 
• Adoption Credit (usually)
• The same benefit married filing jointly couples get for personal exemptions, itemized deductions, the Child Tax Credit, and capital losses (all of these deductions are reduced by half)
• Itemized deductions if your spouse has already claimed the standard deduction, or the other way around.

On top of that, if you live in the community property states of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you have to deal with community property allocations and adjustments, which adds extra work and complexity to your tax preparation chores.
Tip: Only taxpayers who were still legally married as of December 31, 2017 are able to file as marrieds, whether jointly or separately.

[garrett619]

Thanks for quick response, guess I misread the various publications regarding this.  I hate the shortcomings of MFS, but my wife is eligible for PLSF so it makes sense for us to file separate.  At least I saved on FICA so not a total loss.

[gregseparate-1]

What did you end up doing?  I'm pretty much in the same boat MFS for PLSF and both contribute $2,500 to FSA.  We split the child care expenses, but per the tie breaker rule, since I have higher AGI I claim our child, but I'm worried if I split the expenses on our filings it is going to cause the same result.  I'm guessing that even though we split child care expenses, only I can report the expenses without the software filling out a 2441 for both of us.  Same deal though, do not want the child and dependent care credit since we do not qualify, but want to report the expenses appropriately, which of course makes a difference.  The issue has been perplexing me for days.