Enter the amt in box 10 of W-2 wks, DCB (dependent care benefits)...added to ln 7 of form 1040. Also enter same amt in DCB "Amt forfeited from FSA", not included in ln 7 of form 1040. Can anyone explain this?
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Just a guess - 2 different things. The amount set aside and not used for daycare - even though probably lost - (although was there reimursement from the day care provider?). It is possible to get pretax day care, but not qualify for the credit. If you don't qualify for the credit, then the unused gets added back to income. The amount set aside for 125 plan is does not appear on the W-2. The unused amount is just lost if not reimburesed. -
Not offset by Form 2441?
May we assume you DID prepare a Form 2441?
If so, it sounds as if client had unused DCB (as shown in Box 10 of W2) and unless he "proved his innocence" via Form 2441 those benefits automatically became taxable income and show up on Form 1040 line 7.
The amount showing up as "Amt forfeited from FSA" sounds like an internal adjustment ?????
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It would help if you identified where you got it from and which part is giving you trouble. But check the instructions for the 2441, as well as the instructions for completing the W-2 (not the recipient instructions printed on the back), and possibly Pub. 15-B.
DCB FSAs are similar to Medical FSAs in that they're "use it or lose it", but they differ in that for DCBs, the employee is responsible for the reporting on their tax return, while for the Medical FSAs, the employer handles the routine reporting. In both cases, the employee is not taxed on the "lose it" part, but because of the different reporting, for DCBs the employee has to report it properly on the 2441.Comment
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