I made contributions to a dependent care FSA and paid more than that in actual dependent care costs. I want to make sure my return is filled out properly to that effect, but going step by step I can't seem to locate where to include that information.
When you type in your W2, you will record the pretax Dependent Care in Box 10. When you visit the Dependent Care section under Deductions and Credits, you enter your expenses. The program automatically adds any excess deferral to line 7 of your tax return.
You can preview your 1040 here:
That's fine for Dependent care FSA's that show up on your W-2, but mine is managed by a third party provider and not our payroll company so I get a separate Account Statement for my Dependent care FSA and it's not on my W-2 at all.
Where would I enter this information?
. Can you give me more information? Even though it is administered through a third party, is it sponsored through your employer and is it funded out of your paycheck and treated as pre-tax dollars?
My dependent care FSA contribution is not in box 10 on my W-2. Should I deduct the contribution from the total dependent care expenses? Turbo Tax did not ask if I made contributions.
No, if you just subtract the contributions from the total dependent care expenses the limitations will not be applied correctly.
If you employer did not put this amount in your W2 (box 10), and you can't get a corrected W-2, then you should list it in box 10, as you enter the W2. For the calculations to perform properly this is the correct way to handle it in TurboTax. The FSA, even though paid by you, was paid with tax free funds so it must be accounted for.
This question was previously answered by DianeW
I'm having the same issue but not through a W2 but through a K1. The partnership provides a dependent care FSA and the amount we contributed is in Box 20 code AH. While I entered the amount accordingly in Turbo Tax, TT doesn't adjust the K-1 income accordingly. Is there somewhere I can enter the amount such that the FSA amounts we contributed are accounted for?
Box 20 code AH is an informational box on the K-1. It will not adjust the income. Any Flexible Spending Account (FSA) contribution should already have reduced the distribution reported on the K-1. If it has not, then the adjustment should be made on the Partnership or S-Corp return to properly flow-through on the K-1.
The same is true on a W-2. The FSA contribution is typically listed in Box 12 or 14 as a notation, but the adjustment for wages is already part of the Box 1 data.
There isn't an entry area on TurboTax for FSA contributions because they are not deductible on the tax return. In order to reduce your income, that income adjustment must be reflected on the K-1 or W-2 by reducing the distribution amount or wage.
I didn't use all of my FSA for dependent care in 2020. Do I need to tell them the amount I really spent vs. what they took out? The difference is over $1000. I don't want to get in trouble for not telling them but I don't see a way to add this in Turbo Tax.
Edited 1/21/21 3:26 PT
@catsnrabbits You only pay tax on used for unqualified expenses. Anything that you left in the account is generally forfeited, although the rules have relaxed due to Covid.
According to IRS Notice Notice 2020-29 for unused amounts remaining in a health FSA or a dependent care assistance program under the § 125 cafeteria plan as of the end of a grace period or plan year ending in 2020, a § 125 cafeteria plan may permit employees to apply those unused amounts to pay or reimburse medical care expenses or dependent care expenses, respectively, incurred through December 31, 2020.
@catsnrabbits wrote:
I didn't use all of my FSA for dependent care in 2020. Do I need to tell them the amount I really spent vs. what they took out? The difference is over $1000. I don't want to get in trouble for not telling them but I don't see a way to add this in Turbo Tax.
Turbotax will ask for the amount spent on qualified expenses and the amount forfeit in the account (or carried over to next year). The amount of the account is recorded in box 10 of your W-2 and picked up automatically. If your expenses were less than your account but the extra was forfeited or carried forward, it is not taxable to you. If you were paid out more than your qualified expenses, the unqualified amounts paid to you will be added back to your taxable income.
For example, $5000 DCFSA in box 10, you have $4000 of qualified expenses and $1000 was forfeit or carried forward to 2021. Nothing is taxable to you.
Just report all the facts correctly.
Where do I input qualified expenses? Currently it seems turbotax is simply adding the $5000 to my income and taxing it. my summary shows my taxable income as box1+box10 and no further deductions related to the FSA.
Childcare is one of the sections on the Deductions and Credits page. If you don't fill it out, Turbotax will tell you to go back and do it when you get to the Federal Review section. If you don't see an option for Childcare expenses on the Deductions page, you may need to click something like "show me more topics" or "let me choose what to work on."
Thanks, I have filled out my child care expenses in the "child and dependent care credit" already. It simply tells me "It turns out you don't qualify for this credit"
and there is no change in my return amount.
browsing down into the questions, I also see this:
"You didn't use up all of the money you contributed to your dependent care benefits plan. So you don't have any qualifying expenses."
If your child care expenses were covered by the FSA amount, you won't receive the credit so the message you are seeing would be correct. But, the amount of the qualified expenses you entered will not be added to your taxable income either. The summary screen may be confusing. If it were added to you taxable income, you will see it on Line 1 of your Form 1040. The amount will be your Box 1 wages with the amount of unused benefits with DCB on that line.
Preview your Form 1040 and see what is on Line 1. Do you see DCB?
If you see the full amount added, go back through the Dependent Care screens and make sure you selected and applied the expenses to the correct child(ren) and entered all of the required information for the care giver's facility. The SSN or EIN of the caregiver has to be reported. @jakubdudek
@jakubdudek wrote:
Thanks, I have filled out my child care expenses in the "child and dependent care credit" already. It simply tells me "It turns out you don't qualify for this credit"
If you provided care for one child, the maximum eligible expenses is $3000. If your FSA is more than that, then you can't claim the credit on top of the FSA. The FSA is better than the credit for most taxpayers anyway.
If you provided care for 2 or more children, the maximum eligible expenses is $6000, and the maximum FSA is $5000, so it is possible to have an FSA and also have $1000 of eligible expenses for the credit.
However, you still need to do that section of the program to create form 2441 so that it resolves the amount of your FSA benefit in box 10 of your W-2.
thanks for the detailed help. Yes indeed, if I look at my 1040, I see DCB written in and the amount written in is the total of my W2-box1 + $5000 (ie + the FSA total as though I had no eligible expenses)
In that case, make sure you have claimed a dependent with a valid social security number, who lived in your home more than half the year. A dependent who you claim via a divorce order but does not live with you, does not qualify. Also, you and your spouse, if married, must both have income from working, or have been students.
I reviewed my dependent, all information is in. They are my children, social security numbers, live with us all year, etc...
Ah! you've found the problem. I have not entered my wife's income yet, so it probably looks like she's not working therefore my expenses currently look ineligible. This is ringing a bell from previous years! thanks.
I don't have "My Accounts" as an option only "Intuit Account" which does not have a Tools or Tax Summary.
@catsnrabbits You have to actually be in your return to see the 'Tools' in the left-side menu (screenshot).
Click on Tools, then Tax Tools, then View Tax Summary from the popup menu (screenshot).
Click this link for instructions on How to Manually Enter a W-2.
I guess I spoke too soon. I added my wife's K1 income and child care expenses are still being taxed. What should I look at next?
@jakubdudek K-1 income is often passive. Is she an active participant? Child care expenses only count if your spouse works, goes to school or disabled.
@jakubdudek wrote:
I guess I spoke too soon. I added my wife's K1 income and child care expenses are still being taxed. What should I look at next?
Your spouse must have earned income. That generally means income earned from working, and is usually defined as income that is subject to either social security withholding or self-employment tax.