Divorced Dec '16, child is claimed by mother. Unable to change FSA childcare due to employer plan. Paid daycare & reimbursed w/receipts. Is the $5000 taxable to me?

[Divorced-Dad]

Made employer benefit selections in September 2015 for year 2016.  Separated in Dec 2015 and divorced in December 2016.  I could not change the FSA childcare of $5000 that I had selected. 

I paid childcare throughout the year and submitted receipts for reimbursement for total $5000. 

I pay child support, however my wife claims child as her dependent.  I cannot claim as dependent.  Is the $5000 taxable to me?

[ChristinaS · Accepted solution]

Yes- unless you have primary custody.

It doesn't matter who claims the child as a dependent. The Dependent Care Benefit goes with the parent with whom the child lives with the most.

If your ex-wife has primary custody, then the pretax FSA is added right back to your wages on line 7 of Form 1040.

[john_bh]

This is a ridiculous rule. My situation is very similar to the original question. As I complete my 2016 taxes I'm now finding that using this employer 'benefit' was a complete waste of time and I'm now left with additional taxes to pay that I had not anticipated.
I'm baffled why divorced dads who pay daycare expenses, but do not necessarily have the child living with them the most can not take advantage of this tax benefit.

[peepiceek17]

This is also not what the IRS form instructions say to do.  If it is in a dependent care flex spending account and is forfeited, you put the forfeited amount in Form 2441 Line 14.  That ends up changing the DCB amount to 0.  Turbo Tax seems to have screwed up on this one. :(