Spouse Did Not Meet Earned Income Limit

[Guest thefuture54]

We had an employee who had elected $5000 in Dependent Care Benefits. All $5000 was paid out to the employee. The spouse started her own business and due to start-up costs and expenses only had earned income of $3500 at the end of the year. What needs to be done to correct this? Does the employee have to pay the $1500 back under the "use it or lose it" provision?

[masteff]

They fix it by filing Form 2441, Part III with their personal tax return.