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Dependent Care FSA accounts

rach&jayrach&jay
in Parenting
I probably should have looked into this further before our open enrollment ended.  But I'll ask now and file it away.  Anyone use this that pays family to watch their DCs.  We pay SIL $50 a week for 2 days.  It seems that if I do that then that money becomes taxable for her and may not be worth it.  Next year though, Riley will be in pre-school / daycare.  Would this qualify?
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Re: Dependent Care FSA accounts

  • A&AmommyA&Amommy
    If you use it to pay a private caregiver, then that person must file their taxes with that income.  For pre-school, daycare it absolutely qualifies.
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  • femmegemfemmegem member
    I believe you can only use the FSA money if you're using it for a licensed DCP, so your SIL wouldn't count. But if you're starting your child in a daycare or preschool then yes, you could sign up for a dependent care FSA.
    imageimage
    Alex (11/14/06) and Nate (5/25/10)
    "Want what you have, do what you can, be who you are." - Rev. Forrest Church
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  • sweetie1528sweetie1528
    as long as they have a tax id, or put it on their tax return, then you qualify.
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  • happ17happ17

    Ok, I know I?ll get flamed for this.

    We actually had a whole talk with our accountant over this. We have a great rate with our nanny, but it?s off the books, per her request. You can?t do dependent care FSA or report it on taxes unless you pay on the books. Our accountant, who used to be an IRS auditor, said don?t bother?it?s not worth it to claim it because you won?t get much back, compared to what you?re saving by doing it on the books. Also, our nanny would in the end get less if we do on the books, even if we pay her more.

    Next year, we?re moving him to regular day care, and we?re doing the FSA and claiming it.

    My babies!! Patrick Aydin, 9.24.07, and Alia Noor, 6.1.11 imageimage
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  • femmegemfemmegem member
    Okay, I don't know what I'm talking about. :)
    imageimage
    Alex (11/14/06) and Nate (5/25/10)
    "Want what you have, do what you can, be who you are." - Rev. Forrest Church
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  • Temp159135562506975Temp159135562506975 member

    correct- if it's under the table- you can not use FSA for this- or your caregiver will need to start paying taxes on the income.

     

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  • tigger1800tigger1800

    Yes I just looked into this extensively to decide if I should set one up this year.  We pay MIL $75/week and I talked to her about it beforehand because it means she will get a W-2 and have to pay taxes on it.  I have to put her SS# on my claim form to pull it out.  She was ok with paying taxes on it and had actually planned to claim it as income anyway, because it means that they can claim expenses as a "day care" on their taxes this year.  So even though she'll lose some of it to taxes, the benefits of the deductions they can claim is worth it.

     I understand it covers pre-school as well, but we weren't 100% sure if we're putting DS in in September or not so we didn't put in any money for that because we didnt' want to lose it if we change our minds.

     

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