Reporting Childcare Expenses

amother

Royalblue

Fri, Mar 29 2019, 7:04 am

amother wrote:

As I just explained above, you don't even file the form with your tax return to get an extra deduction (although it may work out that way). You file it to prove you used FSA funds for a valid childcare expense. If you don't file this form, you will be taxed on all your FSA disbursements.

Thank you - an actual CPA!!!

Do you know what that form is called, so I can be sure I have it included?

amother

Royalblue

Fri, Mar 29 2019, 7:06 am

amother wrote:

CPA here explaining (yes, I am taking a break from work right now!)
Your w-2 shows that you took FSA funds for dependent care expenses on box 10.
You then have to file a form with your taxes that shows where those funds were expended. Basically, you are proving you used those funds throughout the year for its intended purpose (childcare). You have to provide SSN or EIN of organization that provided child care on that form.
If you take FSA funds throughout the year and your W-2 shows that you did so and you DON"T file this form with your taxes, the IRS assumes the FSA funds were used for a not qualified reason and then taxes you on the benefits you took throughout the year.
Kapish?

And I never heard of not providing an SSN or a "placeholder" number. And I have been a tax accountant for 20 years.

I appreciate your time!!!

Do you know if the IRS would ever divulge who/how much was reported to the babysitter? (In other words, would she easily know I was the one who reported the expenses?)

amother

Khaki

Fri, Mar 29 2019, 7:10 am

amother wrote:

Thank you - an actual CPA!!!

Do you know what that form is called, so I can be sure I have it included?

Form 2441.

I also just read your other thread. Lots of misunderstandings Smile

You have NO CHOICE BUT to file Form 2441 and report her SSN. Otherwise the amount in box 10 (your FSA disbursements) will be added on to the wage line on your 1040.

And she may get a "matching notice" which means the IRS says "we have record of this income and you didn't report it. We are refiguring your tax return using these records and you owe XYZ unless you can explain why your originally filed return is correct."

I don't know how likely it is for the IRS to send a matching notice over this issue. Usually they do so over a 1099 that is not reported. I did read somewhere that the IRS did NOT cross-reference the SSNs for alimony paids to alimony receiveds (alimony being taxable to the recipient and deductible to the payor = although this changed in 2018). However, with her being "under review" which means under audit, she may already be in their cross hairs.

The bottom line: if at the beginning of the arrangement she told you she could report it, and you relied on this to use FSA funds for her services, she cannot back out without causing you tax loss. Your reporting it now is a continuation (or culmination) of the agreement.

Gonna sign off now. Maybe I'll log in later!

amother

Khaki

Fri, Mar 29 2019, 7:11 am

amother wrote:

I appreciate your time!!!

Do you know if the IRS would ever divulge who/how much was reported to the babysitter? (In other words, would she easily know I was the one who reported the expenses?)

I can't imagine they would. Just a letter stating they have record of her receiving XYZ income that is not on her return. Of course, she may put 2 and 2 together.
Honestly, I do not know how likely it is for the IRS to match it up. As I wrote above.

amother

Royalblue

Fri, Mar 29 2019, 7:21 am

amother wrote:

Form 2441.

I also just read your other thread. Lots of misunderstandings Smile

Thank you so much!

amother

Coral

Fri, Mar 29 2019, 7:21 am

amother wrote:

You can actually submit form 2441 without furnishing the provider’s SSN.
You need to attach a statement that the childcare provider refused to furnish SSN.
I stated this on a similar thread a while ago and a CPA corroborated it.

amother

Royalblue

Fri, Mar 29 2019, 7:22 am

amother wrote:

Usually you still have to provide name and address, though, to my understanding, so they still know who it is.

amother

Coral

Fri, Mar 29 2019, 7:47 am

amother wrote:

Yes, at this point, perhaps. But we went into the agreement that I'd be providing her information, so initially there was no need to contact a Rav.

I hear you.
I’m not trying to make you feel bad.
You do have a dilemma though.

amother

Khaki

Sat, Mar 30 2019, 9:12 pm

amother wrote:

Yes, at this point, perhaps. But we went into the agreement that I'd be providing her information, so initially there was no need to contact a Rav.

I'm the CPA that responded above.
I don't see this as a question for a rav at all. Once the babysitter gave the go-ahead to OP to use FSA funds at the beginning of the year, that means she gave her permission to report the income on OP's tax return. If the babysitter wants to change her mind right before tax filing time, that's just too bad. She can't change her mind AFTER she told OP to go ahead and after OP took her up on it. Using FSA = automatically means reporting it on your tax return. They are 2 halves of the same reporting coin. What would the question even be for the rav?
"My babysitter changed her mind about reporting her babysitting income, after I went and used FSA funds for an entire year. If I do not report the childcare expense, all FSA disbursements are added to my income and I'm taxed on them. What should I do?" Is that a real question people ask rabbonim? It's like saying "my customer bought a couch for $1,000 at my couch store and now I decide I don't want to deliver it to him." Like, how is that even a question?
OP, I would not even feel guilty reporting it, esp since she didn't answer your numerous calls and texts. Sorry not sorry.

amother

Khaki

Sat, Mar 30 2019, 9:13 pm

amother wrote:

Yes, at this point, perhaps. But we went into the agreement that I'd be providing her information, so initially there was no need to contact a Rav.

Yes, this. They entered an agreement, and now the babysitter wants to backtrack after it's too late and OP used FSA funds, relying on the agreement.

amother

Royalblue

Sat, Mar 30 2019, 9:51 pm

amother wrote:

This.

Thank you, Khaki!