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In order to avoid running afoul again this year, Taxpayer…

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In order to avoid running...
In order to avoid running afoul again this year, Taxpayer wanted to check before collecting a Child Care Benefit from employer.Spouse will claim the dependent credits for 2017, and also contributed $3000 to a dependent care FSA. Taxpayer employer, also offers a Child Care benefit of $2000 for which employees do not need to make a pre-tax monthly contribution, but can still utilize it to reimburse child care costs.It’s essentially free money that Employer is offering, but want to check:1. If Taxpayer does submit receipts from Childs daycare in order to collect the $2000 benefit, should Taxpayer pay taxes through a quarterly estimated payment before the end of the year? Taxpayer wants to avoid penalties.2. If Spouse claims Child as her dependent for 2017 tax purposes, can Taxpayer even collect this money? (Child is however listed as a dependent on Taxpayer benefits information and I pay for his health insurance through Employer).
Submitted: 7 months ago.Category: Tax
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Answered in 23 minutes by:
11/28/2017
Tax Professional: emc011075, Tax adviser replied 7 months ago
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,864
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

Only one person can claim dependent care credit for the same child, even if the expenses are paid by multiple people (parents, grandparent and such). To claim the credit the child must also be claimed as your dependent on your tax return. Any pretax contribution of free assistance will reduce the amount of the qualifying expenses that can be used to calculate the credit. For instance, if you pay 6K for your child's day care but you contributed 5K into your FSA (or get free assistance), you can only use 1000 to figure out the credit. The maximum credit is 20% of the qualifying expenses, up to 3K.

If your contribution to FSA is larger than your actual expenses, or you cannot claim the child/or credit the difference (or the entire contribution) will be included in your taxable income.

1. If he is not claiming the child the 2K will be treated as his income and he will need to include it in the calculation for estimated payments

2. It does it matter how the child is listed on taxpayer benefits information or health insurance. IRS does not use employees benefits information to determine if he can or cannot claim the child.

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Tax Professional: emc011075, Tax adviser replied 7 months ago

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