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legaleagle, Lawyer
Category: Employment Law
Satisfied Customers: 13441
Experience:  Practicing Attorney for 10 years
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Can my employer overwithold dependent care benefits (above

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Can my employer overwithold dependent care benefits (above $5000) even if I only elected to have the IRS maximum ($5000) in a single year. They withheld and reported $6858 in dependent care benefits on my W-2
Thank you for contacting with your question. I will provide legal information related to your question.

Yes an employer can withhold more than the $5000 only if you authorize the deduction. If they took out $6858 during the year and you only authorized $5000 then they illegally withheld money. But if they withheld it and you used the money to pay for child care then you did get the money back and the department of labor will not do anything. If they took the money out and you did not get it back then you have a wage claim with your state labor department and with the US department of labor. So unfortunately you will now have to pay taxes on the amount over $5000 that you received tax free. Since you would have had taxes deducted in each check or now on your return the employer will not be liable for you being taxed later rater than during the year.
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Customer: replied 3 years ago.
The authorized election was $5000
They went over- said it was a computer error- have brushed me off
The IRS has acknowledged it and has sent me an assessment with penalties- we were never reimbursed for the amount over $5k, but did use
after-tax income beyond $5000 for daycare (but we did not claim this on our return or receive a childcare credit)

I'm a Dr and filing a claim seems like it would threaten
my employment but i don't want conflict with the IRS
If you received more than 5000 from the benefit plan then you received the money but if you did not get all 6858 then you need to file a claim for the money in the account. As far as the penalties if you are paying more because of this error you have a claim and should file. If you are fired or there is retaliation then you have a claim for a law suit.

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