I just wanted to make sure if I understood correctly.
This is my case:
I am full time employed and contributing Dependent Care FSA for $3000 per year. We do married filing jointly.
My spouse lost her job but actively looking for the new opportunity. While she is looking, she began working as part time tutor -- so I guess she is self-employed. I expect her earn less than $3000 by end of this year.
In this case, because her expected income is lower (e.g. $2000) than my contribution ($3000), the cost to day care facility will be non-taxable for $2000. Then, there is no penalty but last $1000 will be taxable. Am I understanding right?
Thank you!
