kgeldmacher
Level 1
‎03-30-2021 04:26 PM
Client has DCB from employer and did the mid year adjustment with the employer which allowed extending the time to use the DCB through the end of 2021. Since they only paid a little bit of after school care the unspent portion is taxed as wages on line 1 (normal state of affairs).  However my reading of the IRS guidance (Notice 2020-29) and what the client says was told them by the employer is that it should NOT be taxable due to Covid-19 relief packages.
I marked the return to use ARPA provisions ( General-> Misc Info-> Miscellaneous) and it is taking it as taxable.

Questions: Is this really NOT taxable wages in 2020 due to legislation?  and if so any suggestions as to how to make the program do what I want it to. Hoping someone else has had to grapple with this.
rbynaker
Level 14
‎03-30-2021 05:19 PM

If it's still sitting in the flexible spending account, undisbursed on 12/31/20 then you make the carryover adjustment on Form 2441, Part III, Line 14.

https://www.irs.gov/pub/irs-pdf/f2441.pdf

 

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kgeldmacher
Level 1
‎03-31-2021 08:05 AM

Thanks so much ! 

tjwoods69
Level 2
‎04-04-2021 11:11 PM

Client didn't use any DCB funds since there was no summer camp due to Covide-19. I'm getting a critical diagnosis in ProConnect when I complete Form 2441, Part III, Line 14 and it is not allowing me to e-file. I get the following message: "Critical diagnostics exist. E-file cannot continue until all critical diagnostics are resolved". 

Then the  Diagnostic says "Form 2441 is not required when the dependent care expenses are zero. To e-file this return, you need to override the dependent care credit by entering a -1 in General Information section, Form 2441 [Override] and re-process e-file only. Dependent care benefits reported on Form W-2 will still be added to wages".

PLEASE Advise on how to overcome this.

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