Dependent Care Benefit

[skhyatt]

Believe I know the answer here, but want to make sure. Client receives 4000 in DCB. Pays out about 3500 in qualified expenses. The difference will not be carried forward, so it will be forfeited. As I read it, the 500 difference just goes away and the client does not have to pay tax on it?

[Bees Knees]

That is correct. If the $500 excess is forfeited (not received) or is carried forward, it is entered on line 13 of Form 2441 and is subtracted out of the total amount of dependent care benefits. No tax.

[veritas]

If your W2 has $4,000 reflected in DCB and you only spent $3,500 in the same tax year you have $500 in additional income.

[skhyatt]

4000 reflected in box 10 of W-2. Was a FSA. Only 3500 was used. The way I read it, the 500 is forfeited. The "use it or lose it".

[Bees Knees]

If your W2 has $4,000 reflected in DCB and you only spent $3,500 in the same tax year you have $500 in additional income.

Line 13 of the Form 2441 wipes out the amount that otherwise would be carried to line 7 of the 1040. The DCB on the W-2 only goes to the 1040 if the money was received by the taxpayer and not used for qualified expenses. If the money was never issued to the taxpayer, it is not taxable.

[veritas]

Learned something new!