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I forfeited $1300 in dependent care FSA (missed deadline). I spent $3800 total on daycare expenses. $1300 showed up on my W2 form. I use Turbotax. Do I need to do anything different on my tax forms since I did not get reimbursed for the $1300? Can I claim credit for the difference of $2500?

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Here is how to report the amount you forfeited on Form 2441:

Under your employer's dependent care plan, you chose to have your employer set aside $5,000 to cover your 2018 dependent care expenses. The $5,000 is shown on your Form W-2, in box 10. In 2018, you incurred and were reimbursed for $4,950 of qualified expenses. You would enter $5,000 on line 12 and $50, the amount forfeited, on line 14.

It is up to your employer what to do with the forfeited amount:

The IRS gives employers the following options for unused employee FSA balances that are forfeited under the use-it-or-lose-it rule. The source for this is Treasury Proposed Regulation 1.125-5(o).

The employer can simply keep the money.

If the employer doesn't keep the money, forfeited amounts must be used for the following purposes:

To defray expenses of administering the cafeteria benefit plan under which the FSA program or programs are offered

To reduce employee FSA salary reduction amounts (or employee contributions) for the immediately following FSA plan year on a reasonable and uniform basis

Return them to employees on a reasonable and uniform basis

References

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