Reply to Dependent Care FSA Question re: W2

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[quote=Anonymous]I have an extension on my federal taxes because for the first time this year, my HR put my dependent care FSA in Box 10 of my W2. Previously the FSA wasn't listed on my W2 at all. I completed my taxes with TurboTax, as usual, and my Form 2441 matches my Box 10 amount exactly. Despite that, I'm still being charged almost $1k in federal taxes for the full amount of my FSA. The TurboTax pro said it was a mistake on my W2 and to contact my HR. My HR couldn't explain it, but said everyone's W2 has it listed in Box 10 this year. They are waiting for me to email them about it and explain why it's wrong and what correction should be made on my W2.

I'm not finding a clear answer in the IRS guidance because it seems like Box 10 is used for EMPLOYER funded dependent care HSAs, but it's not clear how EMPLOYEE funded HSAs should be documented on my W2. If the answer is, "it just shouldn't be," that will be a hard case to make with my HR and I would need very explicit IRS language to support that. If it's a mistake with the TurboTax software, I'll just file on paper this year and hope the problem fixes itself by next year. It feels unlikely it's a TurboTax issue, since it presumably would have come up and been fixed during tax season.

How should an employee funded (employer takes out pre-tax dollars from my paycheck, entire fund should be tax exempt as long as it's used for properly reimbursable expenses) dependent care FSA be listed in a W2? Does anyone know of the tax code and/or guidance for this specific scenario? It feels ridiculous that this is an issue, since it's such a common type of FSA. But it's also almost $1k in taxes that I do NOT want to pay that unnecessarily.[/quote]

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