The answers to your question- if you have more, just add to this thread!
1. The FSA will not report to the IRS automatically, but they are required to keep the records.
2. You do not need to issue her a 1099-MISC (NEC) because the payments were not made in the course of your business activity.
3.No 1099-MISC is needed.
4.Yes, you will have to provide the Child Care provider information (her social security number) on the Form 2441- when you have the Dependent Care Benefits, you are required to report the information like the Dependent Care benefits. The extra $1,000 will be taxed as regular income- but Turbo Tax will report the information based on your entries.
5. Your mother-in-law can report as Self-Employment income on Schedule C if it is her trade or business.
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