FSA Dependent Care Leftover

[Shock976]

Our dependent care FSA plan had money left in that account at the end of 2020. We didn’t file our claim until May 2021. We were reimbursed approx $3900 as of and looks like we may forfeit $1100. 

When TT asks: "How much money did you have leftover at the end of the year regarding the FSA? What is the correct answer to put there? I assume we put $1100 since that’s an amount we will likely forfeit, but doing so makes tapir tax amount owed shoot up significantly. I though this acct was supposed to save tax $$. 

Thank you!

[BillM223]

The way a dependent care FSA works is that you/your employer can put up to $5,000 into your dependent care FSA>

Then the $5,000 (or whatever) is put into box 10 on your W-2 and at the same time, the $5000 (or whatever) is REMOVED from Wages in box 1 on your W-2 before it is printed.

This means that you are given the full "exclusion" for the $5,000 even before you start to enter anything.

But you must go through the child and dependent care interview to generate the 2441 and to show how you used the money - you don't get to keep the exclusion if you didn't use the money to pay for dependent care or if your employer didn't allow you to carry it over to next year.

So, you put in the answer of $1,100 if that was left over on 12/31/2020. Then you need to trundle on down to your HR or benefits department and ask how your company's rules vis-à-vis dependent care FSA hav changed for 2021 - because Congress has changed the law, but your company is not required to adopt the changes.

Anyway, enter the 1,100 in the W-2 interview (2 or 3 screens after you enter the W-2), then go through the child and dependent care interview to justify what you did spent, then go talk to HR.

P.S., as I type this, it is likely that if you have not entered the care provider and the amounts you spent yet, then the whole 5,000 is being added back to your income. Please don't watch the Refund Meter too closely - there are things happening in the background that won't be clear until you have finished entering everything.