DCA W-2 reporting

[Mary C]

We are having a bit of a dilemna. Although the payroll system is supposed to limit dependent care deductions to $5,000, one participant inadvertently had $5,800 withheld and forwarded on to the TPA. We asked for the extra $800 to be recharacterized as taxable income. Payroll refunded $800 under the dependent care deduction account then withheld $800 as a general deduction to get the tax consequences in sync. They are also only reporting $5,000 in box 10 of the W-2. This creates a disconnect betweeen payroll records and what the TPA shows. What amount should be listed in Box 10 of the W-2, $5,000 or $5,800?

[LRDG]

If you want to correct the $800 amount in excess of the $5k max., elected and reimbursed inadvertently, you will need to add $800 back to taxable income. Box 10 will then be reduced by the $800 to the $5k max.

The TPA may have to reverse $800 in claims paid in excess of the $5k max.

Withhold tax on the $800, issue any corrected W-2s if necessary.