Thanks for the response. Doesn't seem like she is a statutory employee according to the IRS link. How is earned income then defined? Is it line 1 (gross receipts) of schedule C or line 31 (net profit)? I've been using line 1 but according to what you say it should be line 31. This strikes me as odd since in the early days of a business where net profit is 0 or even negative, a couple would not be able to use a child care FSA.
