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Ineligible Dependent Care FSA

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Life994

Junior Member
Hi All,

I have my wife and a 3 year old kid as my dependents.

Around September 2005, my wife started looking for a job and got a good offer. Anticipating that she will start working soon, I enrolled in the "Dependent Care FSA (Flexible Spending Account)" at my work to cover from my kid's pre-school expenses. It was a middle of the year enrollment starting from October 1 until December 31. I contributed about $2000 into the plan.

Unfortunately my wife did not get the job and continued looking for employment. The year ended and she never got any job. I have since got reimbursed the $2000 that I contributed in the plan.

However since my wife did not have any earned income during the year, those claims are clearly ineligible. How do I handle this during tax filing? Should I report the $2000 as ordinary income, or is there more to it like penalties etc.?

Thanks
 


Snipes5

Senior Member
You can claim daycare expenses if one spouse was working and the other was looking for work. I don't remember what the equivalent is, but a good preparer or a good software program should prompt you for this information.

Snipes
 

LdiJ

Senior Member
Life994 said:
Hi All,

I have my wife and a 3 year old kid as my dependents.

Around September 2005, my wife started looking for a job and got a good offer. Anticipating that she will start working soon, I enrolled in the "Dependent Care FSA (Flexible Spending Account)" at my work to cover from my kid's pre-school expenses. It was a middle of the year enrollment starting from October 1 until December 31. I contributed about $2000 into the plan.

Unfortunately my wife did not get the job and continued looking for employment. The year ended and she never got any job. I have since got reimbursed the $2000 that I contributed in the plan.

However since my wife did not have any earned income during the year, those claims are clearly ineligible. How do I handle this during tax filing? Should I report the $2000 as ordinary income, or is there more to it like penalties etc.?

Thanks
When did you get the reimbursement? If it was prior to the end of the year your W2 should relect things properly. In any case, you need to know exactly what your W2 reflects before you determine how to handle the reimbursement.
 

Life994

Junior Member
LdiJ said:
When did you get the reimbursement? If it was prior to the end of the year your W2 should relect things properly. In any case, you need to know exactly what your W2 reflects before you determine how to handle the reimbursement.
LdiJ,

I got the reimbursement prior to the end of the year.

My W2 includes the $2000 on line 10, and deducts it from my Federal, State, Social Security and Medicare taxable wages.

However since my spouse had no earned income in 2005, I'm afraid that the $2000 are unqualified expenses.
 

abezon

Senior Member
Dude, if the money is in your pocket & not some day care's bank account, you had no day care expenses! Be thankful you got the money back. Employers usually keep any unspent balance in a flex spending plan & you lose it forever.
 

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