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Box 10- Dependent Care Benefits

Just wondering if anyone knows why my Federal Tax Due goes up by $1000 when I enter the $5000 into Box 10?  I saw a previous question for almost the same details and the response was to fill out Form 2441.  My form 2441 is filled out and it appears I'm still paying taxes on Dependent Care Benefits???  I saw this issue last year and am wondering if Turbo Tax does not recognize this benefit???  Thanks!
    What I'm thinking it's doing is this... you basically shelter from any income taxes your DCBs... therefore, your W-2 taxable wages are lowered in box 1.  You still have to enter your child care amounts... however, the amount you therefore get is reduced by the $5,000.  The rate is generally 20%... therefore, once you enter the DCB from your W-2, the $5,000 DCB reduces the child care credit $1,000 in your case.
      Another reason might be, that you or your spouse did not have earned income.
      • Thanks for the previous responses, but it really doesn't answer my question.  I appreciate you trying though.  We have earned income, more then enough to cover the $5000 from the DCB.  Also, my child care credit is reduced by the $5000 that was used for the DCB, but doesn't explain why my overall tax situation went up by $1000.  If I leave the $5000 out of Box 10, by taxes owed are reduced by a $1000, once I add the $5000 into Box 10, I have to pay an extra $1000???  It almost as if the system is counting the $5000 towards my earned income.
      • First... you are welcome.

        Look at box 1 of your W-2 wages and your yearend paystub, if available.  You are getting a benefit in that your taxable wages (box 1) are lower than your total wages for the year by the $5,000 (plus any other items such as a 401K).

        Does that make sense?
      It seems that TT is adding the $5000 back to your income. Do both of you separately have earned income?
      • My spouse and I both have earned income.   I can see that we get the benefit from a lowered tax amount ini box 1, but if it is adding it back into our earned income, then I'm not realizing the benefit of the DCB.  I think it cost me about $500 last year and it is $1000 this year.  Does seem odd that it is nice neat numbers, since I think it is right at $500 for last year and right at $1000 for this year.  Taxes...what can you do...
      If you both have earned income, the $5000 should not be added back to your income. There must be a mistake somewhere. Check the personal information for your child (especially the birthday, since the credit can only be taken for expenses incurred for a child under 13) and the information about the provider. Did you enter your W2 for the right person? If they get entered under one persons name, TT thinks the other one doesn't have income.
      • I would be interested if anyone else has this same issue?  I enter the dollar amount from box 10, and TT subtracts 20% of it from my tax refund??  Our tax department told us that qualified dependent care FSA contributions are not taxable?  When I view the the TT Form 2441, the Taxable Benefits reads $0.  So why is TT taking tax out of these box 10 dependent care benefits contributions?  Seems like a TT miscalculation, but would appreciate knowing if anyone out there has cracked this nut?
      • I am also having this exact same problem.  It does appear that the $5000 is being added to our income rather than being removed.  I don't get it and kind of wish I hadn't signed up for it this year.  Does anyone know how to report this to Turbo Tax?
      OK... another thought... have you all entered your child care information?  What I mean is this... have you entered the total of the child care expenses, the provider, and the provider's TIN?  If you have NOT, it would automatically add the $5,000 to your income.
      • All child care information is entered correctly, including provider tax ID.  When I look at the Forms that TT fills out, the 2441 appears correct and lists that the Taxable Benefits is $0.  No idea with this one and am hoping that TT either identifies the issue, or provides the solution?
      What do the lines "deductilbe benefits" and "excludable benefits" say?
        It could be that TT was originally giving you the Tax Credit for your childcare expenses; however, once you entered the $5,000 from Box 10 it recognized that you had already gotten the tax advantage on the childcare expenses (because your Box 1 would have been reduced by $5,000, therefore reducing your taxable income by $5,000 already), and you can't get both tax advantages (the reduced taxable income from the FSA, and the Tax Credit) for the same childcare expenses. Therefore, it would take away the Tax Credit.
        • OK..I think I just figured this one out.  Thanks for the last response, cause it really helped me focus in on this.  In 2009 when I subtract out my $5000, I actually pay $600 more in taxes.  This year when I subtract out the $5000, I pay $1000 more in taxes.  I checked last years taxes and the $5000 was not added back into my income.  However, if I remove the $5000 from 2009 and 2010 and go back and look into the Child and Dependent Care section, you will notice by removing the $5000, your tax credit has increased.  Mine increased by $600 in 2009 and $1000 for 2010.  Ultimately, I strongly believe the $5000 is being removed and we are not being taxed on it, but since we used that benefit, the $5000 is being used to subtract from the Child Credit.  So, not allowing tax payers to double dip by using an FSA.  Not sure what it saved me last year, but it appears by doing the FSA, I saved about $400 or so this year.  Hope that helps.  Hate to say it, but TT looks to be correct.