All of the following statements about flexible spending accounts (FSAs) are TRUE, EXCEPT: a. A taxpayer can direct a total of $5,000 from both employer and employee funds into a child or dependent care FSA.
b. Contributions are pre-tax.
c. Funds remaining in the account at the end of the year roll forward to the next year.
d. Expenses paid for with FSA dollars cannot be used to calculate a related credit.

c. Funds remaining in the account at the end of the year roll forward to the next year.

Explanation:

Flexible spending accounts is created by an employer for the employee and is a type of savings account that allows the account holder with certain tax benefits. The employee is required to contribute some amount from his earnings to the account. Contributions made to this account are deducted from your account thereby decreasing your taxable income.The funds are utilized for payment of qualified expenses.

The funds should be used by the end of the year. But the employer can give grace period of two and half months within which you should completely use the fund and finish it. Sometimes the employer might let you roll over $500 per year from the unused fund from your account.

So funds remaining in the FSA at the end of the year doesn't roll forward to the next year. All other statements are correct.

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