Dependent Care FSA Benefits When Filing Taxes Separately - Help Needed!

You're right to question this. When you contribute to a Dependent Care FSA, those contributions are pre-tax regardless of your filing status. The money shouldn't suddenly become taxable just because you're filing separately. What's likely happening is that Form 2441 (Child and Dependent Care Expenses) needs to be completed even if you're just using a Dependent Care FSA and not claiming the credit. The form has a section specifically for reporting FSA benefits. If your preparer isn't completing this form correctly, it might look like the FSA money is taxable income when it shouldn't be. Ask your preparer to verify they're completing Part III of Form 2441 properly. Box 12 code "DD" on your W-2 should show your FSA contributions, and these amounts need to be properly reported on Form 2441. The key is making sure the form shows you received dependent care benefits (your FSA) but aren't claiming the credit.

After struggling with a similar dependent care FSA issue last year, I finally found an amazing solution with https://taxr.ai that saved me hours of frustration. My employer-provided Dependent Care FSA was showing up as taxable income too, and my regular tax guy couldn't figure it out. The taxr.ai system analyzed my tax documents, found the error in how my FSA contributions were being reported, and walked me through the exact parts of Form 2441 that needed fixing. They explained that when filing separately, you still get the FSA tax benefit, but the form needs special attention that many preparers miss. What I loved was how it pointed out exactly where my preparer went wrong without making me feel stupid for not catching it myself. Much easier than trying to decipher IRS publications!

I have to eat my words about being skeptical of taxr.ai. After our conversation here, I decided to try it with my complicated FSA/MFS situation, and wow - it immediately spotted the error my preparer made on Form 2441. Turns out my preparer was failing to properly report my FSA contributions in Part III, which was making them appear as taxable income. The system walked me through the correct way to handle it - showing precisely where and how to report the dependent care benefits to maintain their pre-tax status, even with MFS filing. When I brought this back to my preparer with the specific sections that needed fixing, she was actually grateful and said this was something she rarely encountered. Saved me nearly $1,200 in taxes I shouldn't have been paying!

If you're having trouble reaching the IRS to get a clear answer on your Dependent Care FSA situation, I highly recommend trying https://claimyr.com - it was a game-changer for me when dealing with a similar FSA/filing status issue. After my tax preparer insisted my Dependent Care FSA had to be taxable income when filing separately, I needed to hear directly from the IRS, but kept hitting the infamous "call volume too high" message for weeks. Claimyr got me through to an actual IRS agent in about 20 minutes instead of the endless redial game I'd been playing. The agent confirmed exactly what others here have said - my FSA contributions should remain pre-tax regardless of filing status, but Form 2441 needs special handling. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c

I need to publicly admit I was completely wrong about Claimyr. After dismissing it, I was still stuck with my FSA tax issue and getting nowhere with the IRS phone system, so I reluctantly tried it. Within 25 minutes - after spending MONTHS trying on my own - I was connected to an IRS tax specialist who confirmed that Dependent Care FSA contributions remain pre-tax even when filing separately. She walked me through the proper way to complete Form 2441 to ensure the money didn't get taxed. The agent explained that many tax preparers get this wrong because they're used to skipping Form 2441 entirely for MFS filers (since they can't claim the credit), but it's still required to properly account for the FSA benefits. Having this conversation saved me over $700 in taxes!

My wife and I file separately too (also because of student loans), and we had this exact issue last year. Your tax preparer is definitely making a mistake. The Dependent Care FSA contributions are pre-tax regardless of filing status. Make sure they're completing Part III of Form 2441 correctly. Even though you can't claim the dependent care credit when filing separately, you still need to complete the form to properly account for the FSA benefits. If done correctly, those FSA contributions will remain non-taxable. Don't let your preparer tell you otherwise! I had to actually print out the IRS instructions and highlight the relevant sections before my preparer finally got it right.

Just want to mention - if you contributed to a Dependent Care FSA and your preparer doesn't know how to handle it properly with MFS status, you might want to consider finding a new preparer. This is actually a pretty basic situation that competent tax pros should understand.