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FAQ: Administrators: Dependent Care FSA

Question: Does the employer have any special tax reporting requirements for Dependent Care FSA participants?


Answer:

Each year, when preparing W2 Forms, you must supply in Box 10 the amount contributed for the Dependent Care FSA by those participating in this FSA benefit.

The Box 10 figure is the total amount salary-reduced from the employee (plus any amount contributed by the employer through flex credits, if applicable) for the Dependent Care FSA during the applicable calendar year, even if the flex plan itself operates on a fiscal year basis.

In most cases, this calculation is easily derived from payroll records. Many payroll services automatically enter this amount in Box 10; however, we want to bring this to your attention so you can verify that your W2 Forms are done correctly.

This Box 10 reporting is for IRS informational purposes. The participant is not taxed on this amount. Evidently, the IRS correlates this figure to the Child Care Provider's tax ID (reported by the participant on Form 2441, attached to the tax return) to verify the care provider is reporting taxable income.

No such reporting is required for the Medical/Dental/Vision Care FSA.

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This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Some portions of an answer may reflect the specific administrative practices of our firm, and may not be universally applicable to all flexible benefit plans.

If you have further questions, please email us.