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Dependent Care FSA

BMaltz

My wife and I are married filing jointly. We have two children, age 5 and 8 who attended summer day camp in 2024. I work and my wife put her career on pause temporarily to take care of the children. We have a Dependent Care FSA through my employer which covers Summer Day Camp for dependent children as an eligible expense. When I reached the "Federal Tax Return Alerts" screen I am receiving the following message:

"Dependent Care Benefits Added to Income

You have $150 of dependent care benefits from your W-2s that will be added to your wage income.

If you need to enter child care expenses (or disabled care expenses for [ME] or [MY SPOUSE]), go back to the Child Care Expenses screen.

Since [MY SPOUSE] didn't have any earned income, the dependent care benefits on Form W-2 are taxable.

If you entered an incorrect amount in Box 10 of a W-2, go back to the Your Wages (Form W-2) section and make any necessary."

I went back and entered the summer camp expense on the Child Care Expenses screen but I am still receiving this message. What am I doing wrong? Is the implication that, since my wife is not currently salaried or disabled, we're not actually entitled to the use of a Dependent Care FSA?

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Comments

KristineS

Hi Bmaltz,

It sounds like the alert is prompting a review of your entries.

I'd start by double checking Box 10, Dependent Care Benefits, on your W-2. If the $150 is correct, follow the prompt to go back through the child care section under Income > Common Deductions/Credits. Review your entries to make sure you fully answered all the questions about child care expense.

It may be as simple as a box wasn't checked, or a yes or no answer to a question needs to be updated.

If you continue to get this error message, please log into your account and contact Support for more assistance.

mtexert

I have this same problem except it's $5000, the full amount I had withheld from my paycheck for a dependent care FSA. Trouble is, my wife is a small business owner and works there full-time but doesn't receive a paycheck. (Both parents are required to either be full-time students, or have a W-2/income) Am I just **** then?

MatthewD

Hello Mtexter,

Keep in mind that the FSA amounts, "withheld from my paycheck" is a pre-tax deduction and does not qualify as an expense for the dependent care credit. You already reduced your taxes with the contribution to the FSA.

mtexert

https://community.freetaxusa.com/discussion/comment/5540#Comment_5540

So as it turned out, my wife DID have a W-2, which she just now discovered. I'm in the process of filing an amended return, but it's still saying "You have $2,003 of dependent care benefits from your W-2s that will be added to your wage income." I suspect this is because my wife's income was $2997, exactly $2003 less than the $5000 I took out for my dependent care FSA. I have been looking for documentation to support this but not finding any. Is this a thing? If a spouse makes less than you spend on dependent care, you have to pay MORE taxes?

MatthewD

Hi mtexter,

Make sure that the dependent care benefit (DCB) is applied on the Child and Dependent Care Credit page. If you do not designate that it was used for dependent care, then it is added to income and taxed.

Let me answer you this way: If your spouse has a DCB that is MORE than what you spent on child care, then YES, you have to pay taxes on the part that was not applied or spent on child care.