Over-contribution to Dependent Care FSA

[alexrancel]

Hi all,

I set my FSA Account limit to $5,000 for 2020 but I just discovered that one of my wife's employers added to her W2 a Dependent Care Benefit Box 10 $2,920. It looks like then that we over-contributed for the annual Dependent Care Benefits. Now, they never told us about this "Benefit" because for us it was a discount for our son since she worked at that DayCare facility, she left that DayCare and started in a different one in October 2020 and this DayCare's W2 has nothing on Box 10. I'm looking for some clarification on this to see if they can fix the W2 or I guess that's their way to report expenses for the business but they never notified us about this. Now, since we both contributed $7,920 in total, How much is the tax percentage that we need to pay for the difference?

Thank you so much in advance for your answers.

Alex.

[Opus 17 · Accepted solution]

Box 10 is used for the value of employer-provided on-site day care.  I've never before heard of a case where the employer was a day care itself, but it makes sense.  If the day care provides free or discount care for its employees, the value of that has to be counted as an employer benefit in box 10, or it would have to be added to her taxable wages.  The second employer may be in non-compliance.

Non-qualified amounts of dependent care benefits will be added back to your taxable income and taxed at whatever your marginal tax rate is, although there is no additional penalty.