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My client has a child care FSA. The amount in box 10 on Form W-2 is more than the amount spent due to the Pandemic. Is the difference still taxable?

Dodgerfan
Level 3

My client has a child care FSA. The amount in box 10 of the W-2 is more than the amount spent on childcare due to the Pandemic. The employer has changed their plan to allow the remaining balance to be rolled over to 2021 to be spent. The difference is added to Wage income in 2020 as would be expected in the normal situation.  Is there an exclusion since the unspent amount will be spent in 2021?  If so how would you enter this in Lacerte?

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rbynaker
Level 11

If there is an unspent amount carried over it goes on the Form 2441 in box 14.  Hopefully the software will automatically carry it forward to the subsequent year's box 13.

I have one of these right now and I'm still waiting on documentation from the client's employer showing the amount carried forward.  Not sure how much documentation might be required but with kids involved there's CTC due diligence so I'll err on the side of caution.

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rbynaker
Level 11

If there is an unspent amount carried over it goes on the Form 2441 in box 14.  Hopefully the software will automatically carry it forward to the subsequent year's box 13.

I have one of these right now and I'm still waiting on documentation from the client's employer showing the amount carried forward.  Not sure how much documentation might be required but with kids involved there's CTC due diligence so I'll err on the side of caution.

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Dodgerfan
Level 3

Thank you for your response. I will ask my client for documentation from their employer. I don't see any carryover information on the return, worksheets or statements showing the carryover.  It only appears on Form 2441. There is a line on the form for prior year carryovers.

qbteachmt
Level 15

"The employer has changed their plan to allow the remaining balance to be rolled over to 2021 to be spent."

Because the Law changed. Not out of the goodness of the employer's heart, but because it is now allowed.

https://www.irs.gov/newsroom/new-law-provides-additional-flexibility-for-health-fsas-and-dependent-c...

 

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