Dependent care FSA has more money than eligible because spouse is reporting net loss from self-employment

[aclin]

My employer offers dependent care FSA, and I had put money in there for child care purposes. My wife is self-employed but it looks like she will report a net loss this year, which means that technically the money in the DCFSA is not eligible for tax deduction.

This is my first time using the DCFSA. Will I be penalized for claiming the reimbursement from my FSA? Or will that money just be reported as taxable income (as in, I just have to pay the taxes on that money)?

[Mike9241]

the excess dependent care FSA amount will be included on the line for wages. you just pay income taxes. there is no penalty.