Annual Benefits enrollment time is here again. We're considering contributing $3600 into a Child and Dependent Care FSA to pay my mother in law for child care services for 2007. Two kids, $300/month (the "family" rate). Under the table of course. Therein lies the problem.
The FSA administrator told me that I would have to fill in a form with the child care provider's name and SS number, among other things. Let's assume for the purposes of my question that my MIL doesn't report the $3600 I pay her for child care services. Anyone want to venture a guess as to whether the FSA administrator will provide the IRS with the name and SS number I give them for my MIL along with the dollar amount reported as payments to her?
I could probably help my MIL find $3600 in ordinary and necessary business expenses incurred in the course of providing child care services such that she would have a net income of zero due to providing child care services. Use of a portion of her house exclusively for business purposes, share of utilities, incidental food, toiletry items, diapers (?), other hygiene items, etc. But this is more complication than I want to deal with for the potential tax savings of $1000.
Anyone think the IRS would flag MIL's returns for failure to report the $3600 due to receiving the income data on her from the FSA administrator? Or should I not make contributions to the FSA and continue the current path of under the table payments?
The FSA administrator told me that I would have to fill in a form with the child care provider's name and SS number, among other things. Let's assume for the purposes of my question that my MIL doesn't report the $3600 I pay her for child care services. Anyone want to venture a guess as to whether the FSA administrator will provide the IRS with the name and SS number I give them for my MIL along with the dollar amount reported as payments to her?
I could probably help my MIL find $3600 in ordinary and necessary business expenses incurred in the course of providing child care services such that she would have a net income of zero due to providing child care services. Use of a portion of her house exclusively for business purposes, share of utilities, incidental food, toiletry items, diapers (?), other hygiene items, etc. But this is more complication than I want to deal with for the potential tax savings of $1000.
Anyone think the IRS would flag MIL's returns for failure to report the $3600 due to receiving the income data on her from the FSA administrator? Or should I not make contributions to the FSA and continue the current path of under the table payments?