Contact UsI have used all the funds in a dependent care FSA to pay for my son's day care. I now realized that my son is a nonresident alien and does not qualify as a dependent. I suppose I have to pay back all the taxes I saved with that FSA? How should I enter information in form 2441?
The FSA payments were deducted from my paycheck pre-tax. I think I should pay additional tax due to this misunderstanding, but I am unsure how to enter this information in the return.
EDIT: reply to answer by Chad (I don't know how to answer otherwise)
Thank you very much for your thoughtful comment.
My son is on a J-2 visa and I am on J-1. We entered the US in 2015 and will become resident aliens in 2017. If I understand correctly, I cannot make a first year choice for him because he is (like me) exempt from counting days due to his J visa. (We did not spent time in the US before 2015). So he fails requirement 3 in your answer. Although he was physically present the entire year, none of these days counts for the 31 days. Please tell if I am wrong.
I tried to fill in form 2441 in the meantime. I did enter the total distribution in line 12 as you said. However, according to my understanding I would enter zero on line 25. This is because I have to enter zero on line 16 because my son is not a "qualifying person" as a NRA even though I did have a lot of expenses and I did not forfeit any part of my benefit. Ultimately I would enter the total distribution on line 26. This amount will have to be added to my income on 1040NR and I will pay taxes on it. Please let me know if my understanding is incorrect.
Thanks so much, I really appreciate your help.
EDIT: reply to answer by Chad (I don't know how to answer otherwise)
Thank you very much for your thoughtful comment.
My son is on a J-2 visa and I am on J-1. We entered the US in 2015 and will become resident aliens in 2017. If I understand correctly, I cannot make a first year choice for him because he is (like me) exempt from counting days due to his J visa. (We did not spent time in the US before 2015). So he fails requirement 3 in your answer. Although he was physically present the entire year, none of these days counts for the 31 days. Please tell if I am wrong.
I tried to fill in form 2441 in the meantime. I did enter the total distribution in line 12 as you said. However, according to my understanding I would enter zero on line 25. This is because I have to enter zero on line 16 because my son is not a "qualifying person" as a NRA even though I did have a lot of expenses and I did not forfeit any part of my benefit. Ultimately I would enter the total distribution on line 26. This amount will have to be added to my income on 1040NR and I will pay taxes on it. Please let me know if my understanding is incorrect.
Thanks so much, I really appreciate your help.
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Tax Professional Answers
Chad Hatalla
Assuming your determination of your son's NRA status is correct (see second paragraph for possible alternative if applicable), you need to fill out part III of form 2441. Skip parts I and II. In part III line 12 would be the total distribution you received from the FSA for the year. Most of the other fields would remain $0. Line 25 would be also be equal to the total distribution.
However, before jumping to form 2441, you may want to revisit how you determined he was an NRA and whether you are able to make a first year election under IRC 7701(b)(4) with respect to your son. If he met all the other requirements for the dependent care credit and dependent except US residency, but moved into the US during the year, you may be able to make the first year election to treat him as a US resident from the date he arrived in the US. In order to qualify, he must have met the following requirements: 1. he was a nonresident alien in 2015. 2. He does not meet the green card test nor substantial presence test for 2016. 3. He spent at least 31 consecutive days in the US during 2016. 4. He must have been physically present in the US during 2016 for at least 75% of the days starting and including his first day of the 31 consecutive day requirement 5. He will meet the substantial presence test in 2017. 6. Your child should not have a US income tax filing requirement. If you think this may apply, you can ask how to make such an election and I can respond.
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370 weeks ago
However, before jumping to form 2441, you may want to revisit how you determined he was an NRA and whether you are able to make a first year election under IRC 7701(b)(4) with respect to your son. If he met all the other requirements for the dependent care credit and dependent except US residency, but moved into the US during the year, you may be able to make the first year election to treat him as a US resident from the date he arrived in the US. In order to qualify, he must have met the following requirements: 1. he was a nonresident alien in 2015. 2. He does not meet the green card test nor substantial presence test for 2016. 3. He spent at least 31 consecutive days in the US during 2016. 4. He must have been physically present in the US during 2016 for at least 75% of the days starting and including his first day of the 31 consecutive day requirement 5. He will meet the substantial presence test in 2017. 6. Your child should not have a US income tax filing requirement. If you think this may apply, you can ask how to make such an election and I can respond.