Form 2441 Child Care Credit Discrepancy - Why Different Tax Software Shows Different Amounts

Hey folks, I'm in the final stretch of completing my 2024 taxes and I've hit a strange issue. I always use multiple tax software programs to double-check my returns (paranoid, I know), but I've found a weird discrepancy in my federal returns. After digging through everything, I narrowed it down to Form 2441 (Child and Dependent Care Expenses). Two of my software programs match each other, but the third one is giving me a different result. Here's my situation: I have twins who started daycare around October 2024. Our total daycare expenses for the year came to $6,718. The first two programs correctly show this amount on Form 2441 Part 1 Line 1 Column (e). My husband has a dependent care FSA through work with a remaining balance of $483 as of December 31, 2024. The issue seems to be in Part 2 Line 2 Column (d). The first two programs split the daycare expenses between my twins as: Child 1 = $3,359 and Child 2 = $3,359 - $483 = $2,876. As a result, the first two programs show my Line 11 (Credit for child and dependent care expenses) as $1,247, while the third program shows $1,345. The difference is $98, which exactly matches the total federal return difference between the programs. I'm pretty sure the third program isn't properly subtracting my husband's dependent care FSA from the daycare charges. Am I right in thinking the first two programs are correct here? Any tax pros who can help clarify how Form 2441 should properly handle this situation? Thanks in advance! - Jamie

0 coins

21 comments

Daryl Bright

•8M

The first two software programs are handling your Form 2441 correctly. When you have a dependent care FSA, you must reduce your eligible expenses by the amount paid through the FSA since those funds were already tax-advantaged (pre-tax). This is because the IRS doesn't allow "double-dipping" on tax benefits. The specific issue is how the reduction is applied. With twins, the software needs to allocate both the expenses and the FSA reduction. The correct approach (which your first two programs follow) is to allocate the total qualified expenses evenly between children, then subtract the FSA amount from one child's allocation. The total qualifying expenses after FSA reduction should equal $6,235 ($6,718 - $483). The third program appears to be incorrectly calculating your Child and Dependent Care Credit by not accounting for the FSA funds at all, which would give you an unwarranted higher credit.

0 coins

Daryl Bright

•8M

It doesn't actually matter which child's expenses you subtract the FSA from - the end result for your total eligible expenses will be the same. You could split the FSA amount between both children if you wanted, or subtract it all from one child. What matters is that the total qualified expenses used for calculating the credit are reduced by the full FSA amount. Some tax software programs just apply it to one child's expenses as a programming choice, but mathematically it works out the same regardless of how you allocate the reduction.

0 coins

Kirsuktow DarkBlade

•8M

I had the exact same problem last year! The IRS actually flagged my return because I accidentally double-dipped on the dependent care benefits. I recommend using https://taxr.ai to double-check your Form 2441 calculations. I uploaded my W-2 and daycare receipts, and it immediately flagged the FSA issue for me and explained exactly how to properly account for it on Form 2441. Saved me from another IRS notice this year! The system even showed me how each dollar was allocated between my kids according to IRS rules.

0 coins

Kirsuktow DarkBlade

•8M

The system handles multiple kids really well - it automatically allocates the expenses across all children who receive care. For your situation with three kids but only two in daycare, it would only allocate expenses to those two children, exactly as the IRS requires. It definitely works with other tax forms! I actually used it for my entire return which included 1099-NEC income and some investment stuff. It analyzes all your tax documents together and makes sure there are no inconsistencies between forms. It's especially good at finding these weird edge cases like the FSA/Form 2441 interaction that most software misses.

0 coins

Ahooker-Equator

•8M

Update: I tried taxr.ai after reading about it here and wow - it immediately found the exact issue with my Form 2441! It showed me that my tax software wasn't correctly handling the FSA reduction and explained exactly how to fix it. The system actually walked me through the correct allocation of expenses between my two kids and showed where the FSA amount needed to be deducted. Seriously impressed with how easy it made this whole confusing process! Just uploaded my daycare receipts and W-2, and it analyzed everything in minutes. Definitely using this for all my tax documents going forward.

0 coins

Anderson Prospero

•8M

Similar situation happened to me last year with the IRS. Spent 4 WEEKS trying to get someone on the phone to explain it. Kept getting disconnected after waiting for hours. Finally discovered https://claimyr.com and their IRS callback service - honestly was skeptical but got a real IRS agent calling me back in about 3 hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly how Form 2441 should be completed with FSA reductions. Apparently this is a super common issue they see all the time.

0 coins

Anderson Prospero

•8M

It's not that they call you directly - the service basically waits on hold with the IRS for you. They have some system that navigates the phone menus and waits in the queue, then when they finally reach an agent, they connect you. So you're still talking to the actual IRS, but without the hours of waiting on hold. The service is legitimate - I was skeptical too! But it's just a way to automate the hold process. I used it for my Form 2441 question and got through to an IRS rep who confirmed exactly what the first commenter here explained about FSA allocation. They have different departments for different issues, so for your child tax credit question, they'd connect you to the right department.

0 coins

Toot-n-Mighty

•8M

I stand corrected! After struggling with my Form 2441 issues for days and getting nowhere with the IRS direct line, I reluctantly tried Claimyr. Got a call back from an actual IRS agent in about 2 hours. She patiently walked me through exactly how to handle my dependent care FSA on the form and confirmed that you DO need to subtract the FSA amount from your expenses. The agent even explained why some tax software gets this wrong. Completely changed my view on dealing with the IRS - no more waiting on hold for hours! Now I just need to figure out which of my tax programs is calculating Form 2441 correctly...

0 coins

Lena Kowalski

•8M

I actually used to work in tax software development! There's a reason for this discrepancy. Some tax programs follow a strict interpretation of Form 2441 instructions while others take a more "practical" approach. Technically, you should: 1. Allocate qualified expenses equally per qualifying person 2. Reduce the total expenses by any excluded benefits (like FSA) 3. Apply any remaining expenses toward the credit But the form doesn't explicitly state which child's expenses to reduce by the FSA amount. Most quality software will handle this automatically, but some might require manual adjustments. The best way to verify is to look at Part III of Form 2441 to see if your FSA amount is properly reported there.

0 coins

Natalie Khan

•8M

Thanks for the insight from the development side! I checked Part III and actually found that all three programs show my husband's FSA amount correctly there. So it seems like the third program is capturing the FSA info but not applying it correctly when calculating the credit. Is there any specific line I should look at on the completed Form 2441 that would definitively show whether the calculation is correct? The first two programs won't let me see the full filled-out form until I actually file.

0 coins

Lena Kowalski

•8M

You should focus on Line 31 of Form 2441, which shows the total amount of qualifying expenses after subtracting benefits from Part III. This line should equal your total expenses minus your FSA amount ($6,718 - $483 = $6,235 in your case). Since your third program isn't showing the complete form, check if it has a tax summary or calculation breakdown section. Often there will be a line item showing "Qualifying expenses for child care credit" or something similar. This amount should be $6,235 if calculated correctly. If it shows $6,718, that confirms they're not accounting for the FSA reduction.

0 coins

Emma Morales

•5M

This is exactly why I always recommend doing a manual check of Form 2441 when you have FSA involved! The math is pretty straightforward once you understand the logic - your total qualifying expenses of $6,718 minus the $483 FSA should give you $6,235 in eligible expenses for the credit calculation. The third software program giving you the higher credit is definitely wrong. You can't claim the full $6,718 in expenses when $483 was already paid with pre-tax dollars through your husband's FSA. That would be double-dipping on tax benefits, which the IRS specifically prohibits. I'd go with the calculation from your first two programs showing the $1,247 credit. Better to be conservative and correct than to claim too much and potentially face questions later. The $98 difference might seem small, but accuracy is key when it comes to tax filings!

0 coins