Form 2441Child and Dependent Care

[Tag104]

All the child care expenses that I paid in 2021 were covered by my dependent care benefits. I didn't incur any additional child care expenses over the amount I had taken out of my check for dependent care benefits. Turbo tax is calculating the 20% credit on my expenses that are line 28 of the 2441 form. I don't think I should get the 20% credit because all of the expenses that I paid were already pre-tax dollar. How can I fix this issue in Turbo Tax.  I had $2550.38 carried over from 2020. In 2021 I contributed $1,199.95 to my employer benefit plan. The total child care expenses incurred were $2902.27. Turbo Tax is calculated a .20 credit on the $2550 that was carried over from 2020. This is the summary Turbo Tax gave: $3750 total Eligible expense, less $1200 contribution in 2021 equals $2550 x .20 for a $510 credit. The total expenses I turned into the plan was $2,902.27 and forfeited $848.07. So all the expenses that I paid in child care in 2021 were all pre-tax dollar and I should not get a child care credit. Is Turbo Tax's calculation correct or did I enter do something wrong and need to correct it? If I need to correct, where in the software I can correct this issue?

[ErnieS0]

Please clarify your question. The issue seems to be with your carryover. How much of the carryover from 2020 was used in 2021 to pay expenses?

[Tag104]

I submitted reimbursements in 2021 against all of my rollover of $2550 from 2021.  I incurred and was reimbursed for $2902 in dependent care expenses.  Is it possible that Turbo tax is calculating a .20 tax credit of $510 on my rollover because is it considered non-taxable wages in 2021 and it was added to the $10,500  2021 maximum allowed for dependent care?

I rolled over $2550 from 2020.0 I contributed $1200 to my FSA dependent care in 2021. I turned in for reimbursement for 2021, $2902.00, and I forfeited $848.  

[BillM223]

I believe that I have reproduced your situation, and I agree that it seems odd to allow tax-advantage dollars to be used as the foundation for calculating the Child and Dependent Care Credit.

While I research this, would you mind sending us a sanitized version of your return? "Sanitized" means that all your personally identifiable information has been redacted.

To send us this sanitized return, please follow these steps and give us the token in your response. Also at the bottom of your response, please add "@" and "BillM223" (without the space in between) so I will be notified.

To send us a token, please do the following: 

TurboTax Online:  

Click Tax Tools in the menu to the left.

Click Tools, and then

Click Share my file with Agent.

A pop-up message will appear. Click OK to send the sanitized diagnostic copy to us.

Provide the token number that is generated onto this thread.

TurboTax Desktop:

Select Online menu if the customer is using Windows. Select “Help” if using a Mac.

Select Send Tax File to Agent.

A pop-up message will appear, and the customer will select, Send. If using Mac "Send Tax File to TurboTax Agent" 

Note: Desktop will save a file to your computer unless you uncheck the box.

Another message will appear. Provide the token number that is generated onto this thread.

@Tag104

[Tag104]

I was not getting any answers so I called and ended up being assisted by Kathy. I sent her a scrubbed copy of 2020 and 2021 tax return. She ran the scenarios and came up with the same result on the scrubbed copies that I sent her. So she expedited this issue and submitted for further turbo tax investigation tied to case #[phone number removed]. I have not heard back yet on any resolution or any other way to fix this issue of on Form 2441, line 30, Part III, and line 3 Part II where Turbo tax is calculating a $510 tax credit on my 2020 Rollover. 

Again here are my numbers: in 2020, my employer withheld $5000 for dependent care benefit , Box 10 of Form W2. In 2020, I did not use $2550 of the $5000.00 .  I showed this as a roll over for 2021 on Form 2441 and the form properly was completed with no child care tax credit because all the expenses I turned in for reimbursement were from pre-tax dollars ($2450).

For 2021, I contributed $1200 to my employer's FSA DCB (box 10, $1,199.96), and I had a rollover from 2020 for $2550.00  So, I had $3,750.34 available FSA for child care expenses for 2021.  In 2021, I turned in $2,902.27 for reimbursements.  I forfeited $848.07. 

Through the interview process, I entered the $2550 for a carryover from 2021. I entered the $848.07 for the forfeited amount. I entered $2,902.27 of reimbursed expenses for 2 children.

Turbo Tax populated Form 2441 as follows: Part I - entered all the provider's information and what was paid to them which equaled the amount I spent on child care in 2021 in the amount of $$2,902.27.

Line 12 of Part III shows $1,200 from my W2, box 10.

Line 13 of Part III shows $2,550 of the rollover from 2020 to 2021

Line 14 of Part III shows $848 of the forfeited 2021 FSA

Line 16 of Part III shows $2,902 of total amount of qualified expenses I turned in for reimbursement.

Line 17 of Part III shows $2,902

Line 18 of Part III -earned income  $160,908

Line 19 of Part III - spouse income - $46,772

Line 20 of Part III - $2,902

Line 21 of Part III - $13,050 ($10,050 plus $2550 rollover)

Line 22 of Part III - 0

Line 23 of Part III - $2902

Line 24 of Part III - 0

Line 25 of Part III - $2902

Line 26 of Part III - 0

Line 27 of Part III - $16000

Line 28 of Part III - $2902

Line 29 of Part III - $13,098

Line 30 of Part III - $2500 - I believe this is wrong and should be 0

Line 31 of Part III - $2500 - I believe this is wrong too and should be 0

Part II, Line 2 Colum C - child one - $763 and child two - $1787 - I believe it should show 0 for each child, but I entered these expense that I was reimbursed for each child through the interview process. I tried taking out the expenses, but turbo tax kept still showed the $2550 rollover under child two.

Part II, Line 3 $2550 - I believe this is wrong since all the expenses I used in 2021 were pre-tax dollars.

Part II, Line 4 $160,908

Part II, Line 5 $46,772

Part II, Line 6 $2550 

Part II, Line7 $207,975

Part II, Line 8 .20

Part II, Line 9a $510 ( I believe this is wrong)

Part II, Line 10 $510 ( I believe this is wrong)

Is there anyway to find out if the above information is correct so I can file my tax return, or should I go out and buy another tax software to complete my 2021 taxes? 

[Tag104]

one more thing:

The child care for child one was $868.47 and the child care for child two was $2,033.80. 

Turbo tax did the following for Part II, column C - for child one - $[removed].27 equal 30%, and then multiplied 30% by $2550 with result of $763.06.

Child Two - $2033.80/2902.27 equals 70%, and then 70% multiplied by $2550 with result of $1786.94.

[Tag104]

I submitted reimbursement against all of it. In 2021 I contributed $1200 to my dependent care FSA. I rolled from 2020 to 2021 $2550. So. I had available dependent care FSA for 2021 $3750.34. I submitted for reimbursement in 2021, $2902.27 and I forfeited for 2021 $848.07. Turbo Tax is calculating a dependent care tax credit for $510 on the rollover of $2550.00. Is this correct? 

[BillM223]

I do not believe that it is correct to take tax-advantaged dollars from your FSA in a previous year and use them to generate a credit. However, I now have to queue up with all the other change requests to get this change researched (because they are not going to take just my word for it), completed, and tested. When I hear something, I will let you know.

[Tag104]

@BillM223 

Thank for replying to my issue. Like I said I already sent scrubbed copies of my returns from 2020 and 2021 to a turbo tax expert named Kathy. She concluded the same as you that it the $2550 roll over  from 2020 should not be used to claim the .20 child dependent care tax credit because the $2550 is pre-tax dollars from 2020 and I didn't have any addition eligible child care expenses in 2021 above the total amount I contributed to my employer's FSA plan for 2021. Would it help if I send you scrubbed copies of the 2020 and 2021 federal income tax return?

All my research points to the fact that Turbo Tax is not subtracting the rollover of $2550 from Part III Line 16 and Part II Line 2 column c. Line 30 in Part III should be zero, but because Turbo Tax is not subtracting the rollover from Part II, line 2, column c, it is populating line 30 with the rollover amount of $2550.  I am sure you already know all of this, but I feel that turbo tax is not going to do anything about this issue and maybe I should consider buying another tax software to complete my 2021 taxes.

[BillM223]

There appears to be an issue with using the carry over of FSA funds to calculate a Child and Dependent Care Credit in the subsequent year. This appears to be a case of the "law of unintended consequences" by Congress.

I have recreated the issue and have drafted an investigation on this subject to be forwarded on to whomever.

I must admit that at this late date, it may be unlikely to have a resolution by April 18th. This leaves you two choices (well, three):

1. File an extension and pay any tax you think you would probably owe anyway (if any). e-file when the resolution is announced.

2. If you have the CD/download software, override line 3 on the 2441 to set the carryover to zero (we can talk about this if this is an option). Note, however, that overrides may prevent you from e-filing.

3. Other...enough said.

If you are expecting a refund anyway no matter how this issue turns out, then #1 will be the fastest to get it.

@Tag104

[Tag104]

Re: Entering carryover dependent FSA information for 2021 

Hi Bill,

Well I filed my taxes using H&R Block Deluxe downloaded tax software. I have to say that H&R Block is not as user friendly with the interview process to complete Form 2441. For example, the interview did not ask me if I had a 2020 rollover or a 2021 forfeiture. However, it did walk me through entering the dependent care expenses that I incurred and was reimbursement for from my FSA  plan in 2021.  So I was lost at that point because the software was calculating a dependent child care tax credit on the expenses minus the amount in Box 10 of Form W-2. I started a live chat in the help section of the software to find out where in the software I could enter the rollover from 2020 to 2021 and the 2021 forfeiture. I was 41 deep in line, so I waited for half hour to get help that turned out not enlightening at all! I started exploring in the software based on the menu items available for me related to form 2441. I found the form and did an override on the line items where you enter the rollover and forfeiture.  When I did that the calculation corrected itself to not calculated the childcare tax credit and entered the expected results on the correct lines. Like TurboTax, H&R Block software did not like this action and it forced me to go back and delete the overrides. The message was that you could not do overrides if you are filing electronically. I deleted the overrides and went back to the child and dependent care section of the interview process. When I was in that section, I notice at the bottom of the screen that they had a button for the 2441 form. I opened the form and I see the line items for the 2020 to 2021rollover field, and the 2021 forfeiture field. The software allowed me to enter that information on those respective lines and BINGO! I got the expected results, except that I noticed the the software kept the eligible expense on Part II, column C, but it put a zero value on Part II line 3, line 6, line 9a, and line 10.  Part III, Line 30 and line 0 also has a zero value.  I was happy with these results and when I did the final accuracy review check that I ran on my tax return came back with a message that no error were found in the tax return and I was able to electronically file the return. Both the Federal and State Returns were accepted by the respective tax agencies. 

I think TurboTax is more designed for the consumer that does not know anything about how to complete tax forms if the interview does walk you through it, where H&R Block software expects you to know how to complete a tax form if additional information is need and where to put it on the tax form. With that being said, I think TurboTax should refund me the money I had to spend to purchase another tax software or find another means to complete my taxes on time. Can you direct me to where I can issue a complaint and ask for a partial refund on my software purchase?

Thanking you in advance

@Tag104

[RobertB4444]

@Tag104  Sorry that the TurboTax process didn't work for you this year but glad that you got your taxes filed.  Here is a link for where to request a refund from TurboTax.