Is it possible to shift taxable wages on a tax return?

Question

To clarify my intentions first, this is strictly a question I had out of curiosity. To start, this does relate to my tax return, but here is the situation. This is the first year I started to use a Flex Account (FSA) at work, because I thought it would save me some money. I am claiming one child as a dependent, with almost all of their child care expenses going to the FSA.

After finishing my tax return, I noticed my Federal Tax Refund was quite a bit less than usual, so i created a copy and made some adjustments. What I found is that by using the FSA, I'm losing about 44% of my usual Federal Tax Refund with some rough math and adjustments.

This is going to be slightly skewed, because all I am doing to my wages is adding the Dependent Care Benefits (box 10 on W-2) to my wages (box 1, 3, 5 on W-2) and my child care expenses. This is also considering my tax bracket puts me in the 15% range of $13,250 to $50,400 as a Head of Household (with no spouse).

My question: Is it possible to shift the amounts on a W-2 (with correct adjustments) to tax all of your wages, instead of leaving some of it deducted pre-tax? Ignoring the red flag on the W-2, would this be possible?

I don't plan to do this, because I know without a corrected W-2 (at least), I'm asking to get audited. However, it is more of a serious question, because it would still pay taxes on all of your wages while opting for the federal/state taxes rather than deduct it pre-tax. My thinking would be, the IRS would not like it regardless, because it would involve increasing the refund by a couple hundred US Dollars and changing how I am receiving those wages.

Answer 1

Federal tax refund is taxes you've overpaid. What you're saying is that this year you overpaid less than before. I don't understand why you see this is as a bad thing. Optimal situation is when you have no refunds and no taxes due on tax day, but it is really hard to get there. But the closer you can get - the better, which means that reducing your refund should be your goal.

In any case, "Federal Tax Refund" is meaningless, what you need to look at is your actual taxes due. This is the number you should be working to reduce.

Is it possible to shift the amounts on a W-2 (with correct adjustments) to tax all of your wages, instead of leaving some of it deducted pre-tax?

Why would you want to pay more tax?

If your goal is to have a refund (I.e.: it is your way of forcing yourself to save), then you need to recalculate the numbers and adjust your W4 taking the (pre-tax) FSA into account.

If it is not the goal, then you should be looking at the total taxes owed, not the refund, and adjust your W4 so that your withholding would cover the taxes owed as closely as possible.

And to answer your question, after all this - of course it is possible. But it is wrong, and will indeed likely to trigger an audit. You can write whatever you want on your tax return, but in the end of it, you sign under the penalty of perjury that what you filled is the correct information. Perjury is a Federal felony, and knowingly filing incorrect tax return is fraud (especially since your motive is to gain, even though you're not actually gaining anything). Fraudulent tax returns can be audited any time (no statute of limitations).