Employer combined all FSA benefits in W-2 box 10 - over deduction limit?

The good news is you don't need to worry! Your employer made a common reporting error, but it shouldn't affect your taxes negatively. The transportation FSA benefits (sometimes called commuter benefits) should NOT be included in Box 10 of your W-2. Box 10 is specifically for dependent care benefits. Those transportation/commuter benefits should be entirely excluded from your taxable income and not reported in Box 10. They're covered under a different section of the tax code (Section 132) than dependent care FSAs (Section 129). The transportation benefits are considered a qualified transportation fringe benefit. I'd suggest following up with your HR or payroll department and ask them to issue a corrected W-2 that properly reports just the $5,000 dependent care FSA in Box 10.

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Former payroll specialist here. This is a common error, especially with smaller companies using basic payroll systems. Box 10 is ONLY for dependent care assistance payments (up to $5000). Your transportation FSA falls under qualified transportation benefits and should never be included in Box 10. Your employer needs to issue a W-2c (corrected W-2) showing only the $5000 in Box 10. This way you won't potentially face questions about exceeding the dependent care limit. The transportation benefits are already excluded from your taxable wages in Box 1, so they don't need to be reported separately elsewhere on the W-2.

Has anyone actually had the IRS question their return over this specific issue? I have the same problem with my W-2 but I'm wondering if it's worth the hassle of getting a corrected form if the IRS doesn't typically flag this.

This is exactly why proper W-2 reporting is so important! I work in tax preparation and see this mistake frequently. Your employer definitely needs to issue a corrected W-2 because the IRS computers are programmed to flag dependent care FSA amounts over $5,000 in Box 10. The transportation benefits should have been handled completely separately - they reduce your taxable wages in Box 1 but don't belong in Box 10 at all. When you contact HR again, you can reference IRS Publication 15-B which clearly states that qualified transportation fringe benefits are reported differently than dependent care assistance. If you're filing soon and can't wait for the correction, you could file with Form 8862 attached explaining the employer error, but getting the corrected W-2 is definitely the cleaner approach. Don't let them tell you it "doesn't matter" - it absolutely does for IRS matching purposes.