Entering rollover dependent FSA information for 2021

[pineapple32]

Hello

I used turbotax desktop to do my taxes in 2020 as well as this year. I imported the prior year's tax file into turbotax 2021.
Here is an issue I'm seeing - My spouse and I contributed a total of 3600 to dependent care FSA in 2020. We could only use 1800 dollars for care in 2020 due to covid. My employer allowed the rest 1800 to be carried over to 2021. This was correctly reflected in form 2441 for year 2020 (filled out by turbotax) - line14 shows a negative 1800.
For 2021, we had about $7000 child care expenses, so I was able to use up the rolled over money from 2020. There were no additional DC FSA contributions in 2021 (box 10 on w2 is empty this year). When I look at the form 2441, the part III is completely empty as turbotax has not filled in the carried over 1800 dollars from last year (on line 14). Even if I fill this information manually in the forms view, turbotax will not do the rest of the calculations in part III of form 2441. As a hack, i was able to put in 1800 in the box 10 of my w2 to get turbotax to fill out part III and calculate the correct tax. Is there a cleaner way to do this?

[BillM223]

"There were no additional DC FSA contributions in 2021 (box 10 on w2 is empty this year)."

So you were not automatically directed to the section on Child and Dependent Care Credit the first time you went through TurboTax? This is why (I imagine) TurboTax did not complete things.

What you needed to do is to go to the "Child and Dependent Care Credit" section under "You and Your Family" in Deductions & Credits. If there is no entry in box 10 on your W-2, this is how you have to do this section so that you will have a chance to have 2441 completely correctly.

BUT before you do that, please remove any entries from box 10 AND remove any edits you did in Forms mode.

Start fresh for this section.

[pineapple32]

Hello Bill

Thank you for you guidance.  I updated the software and went back in again into the child and dependent care credit section (under you and your family). Other than the regular questions about dollars spent etc, the only thing it asks is "did you pay for any 2020 care in 2021?" and then the questionnaire ends once you answer no. It does not ask whether you rolled over any dependent care FSA amounts from 2020 to 2021 tax year.

Just to clarify, I finished my taxes using the interview mode > I went into the forms view as a final cross-check before filing and discovered the error. Any edits I eventually made on box 10 or forms mode were made on a backup tax file and discarded at the end of the session. Do you have any suggestions?

[BillM223 · Accepted solution]

Unfortunately, if you had no FSA contributions in 2021 (i.e., no entry in box 10 on your W-2), you don't see the screen you need to see in order to enter your carryover from 2020.

Try this workaround:

1. When you enter your W-2, enter $1 in box 10. This will trigger Dependent Care processing and will reveal some different screens.

2. Enter the previous amount on the subsequent screens (like how much you spent for care, who you paid it to, etc.)

3. When you see the screen with "Did you pay for any 2020 care in 2021?", answer No (I assume you did before, too).

4. The next screen should be a screen you haven't seen before, titled "Carryover from 2020 used in 2021?" On this screen, enter your 1,800 carryover.

5. The 1,800 will now appear on line 13 and 14 on the 2441. Well, line 14 will be 1,801 because the $1 in box 10 gets added to it.

6. The rest of the 2441 will be completed, at the worst off by only a dollar. It may well be that the credit calculation (which is only a percentage of the expenses) may be the same with either 1,800 or 1,801 - I leave this for you to discover. Still being only a dollar off and getting to e-file (and get your refund MUCH faster) if probably worth it.

Note, there is a chance that the IRS may eventually realize that you altered the W-2 (remember that they got a copy of your W-2 and can compare) and send you a letter. Be sure to write down what you did and why (it was the only way to workaround the software), so that you can respond to that letter - it one ever comes.

[pineapple32 · Accepted solution]

Thank you for pointing me in the right direction. I was able to get the issue fixed by putting 1 cent in box 10 of my imported W2. That way, the part III of the 2441 gets filled out by turbotax and the total amounts received as an employee (line 12 of 2441) remains zero. I hope this will keep the level of discrepancy at the IRS level to a minimum.

[edhondl]

I was having this same issue.  I put $.01 in W2 box 10 and TurboTax allowed me to enter the carryover.  That solved that problem.

However, I don't think form 2441 is being completed correctly in Windows version of Turbotax Premier.  Here is my situation:

- I had a $779 Dependent Care FSA carryover from 2020 to 2021 and made no additional DC FSA contributions in 2021. 

- I paid $1,581 in child care expenses in 2021 for one child, but only used $734 from my DC FSA.  I will be forfeiting the remaining $45.

Here is what I get on form 2441:

- Line 1 has $1,581.  This is correct.

- Line 2 (c) has $1,626.  I was expecting it to be $1,581.  The $1,626 is $1,581 + $45.  Is the forfeited amount considered an expense for this credit?

- Line 3 is derived from Part III Line 31.  It has $1,626.  I was expecting it to be $847.  See my Part III lines below

- Part III Line 13 has $779.  This is correct.

- Part III Line 14 has $45.  This is correct.

- Part III Line 15 has $734 ($779 - $45).  This is correct.

- Part III Line 16 has $1,581.  This is correct.

- Part III Line 17 has $734.  This is correct.

- Part III Line 20 has $734.  This is correct.

- Part III Line 21 has $11,279 ($10,500 + $779 amount from Line 13).  This is correct.

- Part III Line 22 is $0.  This is correct.

- Part III line 23 has $734.  This is correct

- Part III line 25 has $734.  This is correct.

- Part III Line 27 has $8,000.  This is correct.

- Part III Line 28 has $734.  This is correct.

- Part III Line 29 has $7,266 ($8,000 - $734).  This is correct.

- Part III Line 30 has $1,626.  I was expecting this to be $847 ($1,581 - $734).  The description states: "Don't include in column (c) any benefits shown on line 28 above."  I assume this means that we need to exclude the $734 from the $1,581 amount on Line 2 (c).

- Part III Line 31 has $1,626.  I was expecting this to be $847 as well.

Any insight would be appreciated.

[dave]

I agree and am seeing the same thing WRT line 30 miscalculating when a carryover is present.  I did some additional "testing" by plugging in different numbers:

If you have 2020 carryover but no 2021 benefits (ie line 10 on W-2 = $0.00) (my situation as well)  then you have to do the "penny hack" to trigger the form, AND ALSO it does not subtract the carryover on line 30 of the 2441 as you have described.  Looks like two separate bugs related to carrroyver and 2441.

If you have no 2020 carryover but  2021 benefits,  it handles that correctly, subtracting the 2021 benefits from expenses as expected.

If you have both 2020 carryover AND 2021 benefits, it combines the two behaviors above : even though line 28 adds both 2020 carryover and 2021 benefits correctly, in the end at line 30 the 2021 benefits get subtracted out, but the 2020  carryover gets ignored.

So, in addition to the "penny hack" bug, Form 2441 line 30 is NOT handling the 2020 carryover correctly, even as line 28 is calculated correctly.

[Tag104]

@edhondl @pineapple32 @BillM223 

I am having the same issue where my 2020 rollover is not being subtracted from Line 2 column c. I detailed my situation to @BillM223. Bill concluded that the form is not calculating Line 30 correctly and I had a Turbotax expert who is a CPA with 25 years experience. I sent her scrubbed copies of my 2020 and 2021 returns. She ran the numbers and came up with the same results that I did. She closed my case and escalated it for a Turbotax investigation. She said the bad news is that I can't file my return and she was not sure how long Turbotax with take to fix the issue with Form 2441 and relater 2020 rollover of DC FSA to 2021. So I went out and bought H&R Block DELUXE software to file my 2021 taxes. 

Here is my situation. I did have DC FSA withheld from my wages in 2021 for $1200 and I had a rollover from 2020 to 2021 of $2550. So my total DC FSA available for 2021 was $3750. I was reimbursed for qualified child care expenses from my FSA in the amount of $2902 and forfeited $848.  Turbotax is taking $370 subtracting the $1200 and calculating a .20 tax credit of $510 on the rollover ($2550x.20).

I entered all my qualified expenses in Line 1 Part I-this is correct

Because I had DC FSC withheld from my wages in 2021, Turbotax completed Part III:

Line 12 - $1200 Box 10 of Form W 2 is correct

Line 13 - $2550 this is the rollover from 2020 is correct

Line 14 - ($848) forfeited is correct

Line 15 $2902 correct

Line 16 $2902total DC FSA reimbursed in 2021 for my two kids is correct

Line 17 $2902 is correct

Lines 18, 19 and 20 are correct 

Line 21 $10500 plus my rollover $2550 for a total of $13,050 is correct

Line 23 $2902 is correct

Line 24 - 0

Line 25 - Excluded Benefits of $2902 is correct

Line 27 - is correct (I have two kids) $1600

Line 28 - $2902 is correct

Line 29 $13,098 is correct because the would have been the total excludable amount, but I  only had $3,700 to use and I forfeited $848.

Line 30 - $2550 - THIS IS NOT CORRECT - this should be ZERO

Line 31 - $2550 - THIS IS NOT CORRECT - this should be ZERO

Part II - Line 2 C - Kid 1 should be zero, but turbo tax entered $763, and for kid 2, $1,787.

Part II Line 3 and Line 6 Turbo tax entered $2550 on each line - each of these lines should be ZERO

Line 9a $2550*.20 for $510 - I should not be getting a dependent care tax credit because all of my dependent care expenses for 2021 were already pre-tax dollars from an DC FSA plan.

Do you think because Turbotax asks about the 2020 to 2021 rollover in two different places of the interview, that might be the problem?

I tried subtracting my rollover from my DC expenses ,but it did not work. Turbotax calculated another incorrect amount. This is because this is what turbotax is doing: It takes each child's expenses and divides it by the total expenses of the two children. It gets a percent, then multiplies that percent by the rollover. That is what is happening to me.

I entered in the interview for child expense for kid 1 - $868.47 and kid two $2033.80.  Instead of $2902 being subtracted from these amounts Turbotax did this:

Kid 1 - $[removed].27 equal .30 x 2550 and entered $763.06 in Part II Line C - this should be ZERO

Kid 2 $2033.80/2902.27 equal .70 x 2550 and entered $1786.94 in Part II Line C - this should be ZERO

[Tag104]

@Dave see what I post @TAG104 

[pineapple32]

@edhondl @pineapple32 @BillM223 @Tag104 

Hello I'm the person who started the original thread. After reading responses from edhondl, I did go back and recheck the calculations and I agree with all of you that turbo tax is not handling the calculations properly on the 2441.

The original question was just about getting turbo tax to fill out Part III of the form. Makes me wonder if all the forms and schedules we have been blindly filing with IRS were really accurate? 

[Tag104]

Hello @ pineapple32

I have been using Turbotax for year and have come to trust and appreciate the software. I am really disappointed that Turbotax has not issued a hot fix to correct this issue like all software providers would have. This is a serious issue and I don't want to file knowing that Form 2441 is wrong and confirmed by 2 Turbotax experts and one of them being a CPA. I am going to use H&R Block's software (this has forced me to spend an additional $40 to prepare my taxes. I paid $56 for the Turbotax desktop premier edition (I bought the disk).  I will let you know how that goes once I get it done. If I get the expected results, I am going to call customer service if there is such a thing at Turbotax. If I can't find a number for customer service, then I am going to file a complaint with the Better Business Bureau. 

[edhondl]

I have also decided to part ways with Turbotax.  Eough is enough.  I was fortunate to get my taxes done at a AARP Taxaide site for free this year.  They offer this free service across the country.  They use TaxSlayer software and this software is handling Child and Dependent care correctly.  Do a search on "tax-aide@aarp".

[yoyo_22]

I wonder how you were able to use HR block to enter dependent care FSA and expense information?  I went through the interview questions and there was no where to even enter rollover FSA amount...  Thank you!

[Tag104]

@yoyo_22 

I used the H&R Block Deluxe software. The interview process does not ask you for any fsa dependent care rollover from 2020 to 2021 or for 2021 forfeiture. You have to put that information yourself in the form 2441. In the section where you enter all the information for the child care expenses you paid to your providers, at the bottom of the screen on the right , there is the link to the form. The word ‘form’ shows on the screen. You have to click on the word ‘form’ to access the line items on form 2441 . Look for the line item where it says ‘rollover’ and enter your dollar amount there. If you have a forfeiture for 2021, enter that amount on the line that says forfeiture. I hope this helps you.

[yoyo_22]

@Tag104 

Thank you so much!  If you manually override the form 2441, does it mean you can't efile your federal and state returns but have to mail the paper returns?  At least this is what the HR block rep told me.

If I don't have any rollover from 2020, just rollover from 2021 to 2022, would Turbo tax work?  Thank you!