What Happens If You Exceed The Flexible Spending Account Contribution Limit?

If you exceed your flexible spending account contribution limit, you have to add the excess to your taxable income when you fill out your Form 1040.

 For example, a DCFSA (Dependent Care Flexible Spending Account) allows you to be reimbursed on a pre-tax basis for childcare or adult dependent care expenses for qualified dependents that are necessary to allow you or your spouse to work, look for work (with income during the year), or your spouse to attend school full-time. You (and your spouse if you are married) must have earned income during the year, however if your spouse attends school full-time he or she does not need to have earned income. Under Internal Revenue Code section 129 (see sections 129(a)(2)(A) and 129(b)(1)), the maximum amount that can be elected for a DCFSA is limited to the lesser of:

• $5,000 for single individuals or married couples filing joint returns;
• $2,500 for married couples filing separate returns,
• the employee's earned income (if less than $5,000/$2,500) or
• the spouse's earned income (if less than $5,000/$2,500). 

So if a couple each has $5,000 withheld at work for a DCFSA, it's no problem unless they happen to be married.  An unmarried couple has a combined DCFSA limit of $10,000 ($5,000 x 2).  If they happen to be married, however, their combined limit is $5,000.  The excess of $5,000 must be added back to their taxable income at tax time. 

When they prepare their Federal taxes, they will need to complete Form 2441 "Child and Dependent Care Expenses" (attached to Form 1040), and add the amount in excess of $5000 back into your income.