Dep. Care FSA: Reimbursed in following year

[phildonnia]

I incurred and paid a $25 qualifying charge to a Care Provider in 2019, but it was not submitted and reimbursed by my FSA until 2020.  

Should my carried-forward FSA balance include this?  If I include it, it ends up trying to give me a credit on unreimbursed $25.  I don't want the credit; I just want the expense to be balanced with the reimbursement.

The IRS instructions say "Don't include amounts you expect to receive at a future date".  So when should this be included?  In 2020, my reimbursed benefits will be $25 more than my expenses incurred for that year.

[BillM223 · Accepted solution]

"Should my carried-forward FSA balance include this ($25 qualifying charge to a Care Provider in 2019)?"

No, do not enter the $25 as a carryover to 2020.

Form 2441 is more focused on when you incurred and paid the expense, not when the expense was reimbursed. You incurred and paid the $25 in 2019; it just so happens that the FSA didn’t reimburse you until 2020.

You were correct to notice the statement ""Don't include amounts you expect to receive at a future date"." The $25 was paid in 2019 but will be reimbursed in early 2020. 

Yes, your FSA will report to the IRS in 2020 that they reimbursed you $5,050; however, you are following the IRS's instructions, so the disparity between what you show in box 10 on your 2020 W-2 and the amount the FSA reimbursed you is a problem that they will figure out. Your 2441 and tax return will be correct which is what’s important.

Next year, do not enter the $25 as a carryover from 2019 that you used in 2020. Remember that the 2441 cares more about when the expense was paid, not reimbursed.

[phildonnia]

Makes perfect sense, thanks!

[BillM223]

You're welcome!