Tax on unused dependent care?
In 2002, I kept untaxed $5000.00 towards dependent care at my company. I used only $700 towards dependent care. My assumption was that I will loose that money, and I did not get any refund from my company. In 2003, while filing taxes, my CPA informed me that I need to include the unused portion as income and pay federal tax on the unused amount. In effect, I lost $4300.00 and in addition $2000.00 taxes on that. If that is normal, I am not sure that dependent care expenses is a good feature. Please let me know if my CPA was correct to pay taxes on unused Dependent Care amount.
Thanks,
Shekar :(