What happens if you put in and take out too much into your Dependent Care FSA? (Two different jobs)

[DCB]

I moved to a new company this year and was putting $5000 a year or $192.30 a paycheck to my dependent care FSA. I left in Nov and started up a dependent care FSA with the new company. I think I miscalculated and might be putting in over $5000 this year to the FSA and might take out more than the $5000. What are my options and will there be a problem when I file taxes in April 2018? Company A allowed $5000 a year, Company B allowed $2500 a year. I am probably going to be $800 over the $5000 put into the accounts.

[NathanS]

At tax time you'll pay tax on any excess contributions over the $5000 limit for Married Filing Jointly/Single/Head of Household filers. Please see the Dependent care FSA section of https://en.wikipedia.org/wiki/Flexible_spending_account for more info.

[2wheelmotoJ]

My wife's work told us we could both contribute and we didn't realize that 5k is the max per household, so we each put in and got reimbursed our 5k. With Turbotax online, is the additional tax we owe calculated automatically? Is there some place I need to report that I paid more than the 5k?

[KarenJ2]

If the FSA account was for dependent care expenses, the software will take the excess contribution into account when you complete Form 2441, Dependent Care expenses, and the excess will be reported as taxable income.

[pmgreg3]

Does the excess money get reimbursed when filing taxes or does it get reimbursed by the DCFSA provider?

[Mike9241]

@pmgreg3 you hijacked anothers thread.    your question is different. what do you mean by excess money getting reimbursed?  

Unlike a health savings account, unused money in a DCFSA generally doesn’t roll over to the next year. Your employer may offer a grace period of two-and-a-half months into the new year to use up your funds before they expire.

The exception is for plan years ending in 2021 and 2022, as COVID-19 relief measures allow employers to permit account holders to carry over their unused funds into the next year.

Section 9632 of ARPA increased the excludable amount to $10,500 for 2021. The exclusion applies whether the dependent care assistance is provided directly through a DCAP or a dependent care flexible spending arrangement (FSA) under a cafeteria plan.

Under Notice 2021-26, unused funds remaining in an employee's DCAP in 2020 or 2021 that are carried over to plan years ending in 2021 or 2022 will remain excludible from gross income and wages for 2021 or 2022 to the extent that the amounts would have been within the exclusion limits for the years from which the amounts were carried over. Notice 2021-26, however, also clarifies that reimbursements in 2022 will be taxed to the extent that the reimbursements exceed the 2022 applicable exclusion limit if the amounts do not derive from a grace period or carryover, which could occur for a non-calendar plan year that began in 2021.