Pre-tax dependent care for non-custodial parent?

[slushpuppy]

Hi, I have the following situation. I have been separated from my wife for all of 2007, and we have 2 children. At the beginning of the year, she elected to participate in the pre-tax dependent care flex spending plan through her employer, because she was paying for half of the daycare / after school care. Our original plan was to each claim one of the children on our tax returns.

Because of certain events, the children were not able to stay with her during 2007, so I am the custodial parent for both children (we are in agreement on that). Now that we are filling out our tax returns, she is concerned about not being able to claim a dependent child after receiving the pre-tax dependent care benefit.

So my question is, how should we proceed? I'm entitled to claim both children, but don't want her to be in any sort of legal or financial trouble because of her participation in that plan. What are our options?

[veritas]

Since the children

lived with you all year she may not claim any childcare expenses.

So the pretax amount becomes taxable on her return.

You on the other hand can claim the expenses and may get a credit.


You also could file a joint tax return and solve her probelm (if you were not divorced or legally seperated in 07) .

It may not be the best thing for you however.

[slushpuppy]

Thanks for the response, I appreciate it.

Could she just fill out Part III of Form 1040A and claim 0 qualified expenses on line 16? Are there any legal issues with participating in dependant care benefits and then reporting none on the tax return (which essentially makes that money taxable)?