Hi,
With the pandemic in 2020, I didn’t send my kid to daycare for the most part of year. I stopped contributing to my Dependent care FSA (DCFSA) mid-year as soon as we were allowed to do that, but I had already contributed $2500 by then. I have receipts from daycare from first couple months of 2020 which totals to $1950. So my question is basically around getting remaining $550 from DCFSA. My mother-in-law is visiting us and I am thinking to pay her for babysitting for couple weeks and use her details and SSN for claiming $550.
She is a greencard holder and she stays with us whenever she is in USA (She spends most of the time in India). She has no other source of income and has not filed any tax returns in USA till now. Since I’ll be submitting receipt to claim $550 from FSA, and would be including that in my tax return (form 2441) as well, do I really need to issue W2 to her as our household employee and/or any other things that I need to consider? Also since $550 would be her only income in 2020, does she need to file tax return?
She is not being claimed as dependent on my or my brother-in-law's tax return.
