@serhatyal wrote:
Of course, let me share my situation, and maybe you can help.
To claim the credit, you must provide information about the provider, and they may be expected to file a tax return. If the care was provided in your home, they are your household employee and you must issue them a W-2 if the amount is more than $2200. You do not need to withhold or pay household employees tax (social security) when the employee is your parent or grandparent, but you must still issue the W-2. When you employ a non-resident without a tax number, you are required to withhold income taxes, that they only get back if they file a tax return and claim a refund. I believe this is form 1042-S but I am not an expert in this area. To claim the credit for someone who does not have a tax number, you can file by mail and attach a written explanation of the situation, that includes the name, address and other identifying information for the provider. The IRS will review the statement and may or may not award the credit. (This is usually used when the provider is a US person who refuses to give their SSN. I don't know if this would work in your situation, where you employed a non-eligible worker and failed to give them a W-2 or make the proper mandatory withholding for a non-resident.)
Your grandmother might be a resident or non-resident depending on how long they were in the US (use the substantial presence test). If a resident, she is required to file a US tax return that reports and pays income tax on all her world-wide income. If a non-resident, she is required to file a non-resident return (form 1040-NR) that only reports and pays tax on US source income. She would apply for a an ITIN as part of that process. Additionally, if she is thinking of being a legal immigrant (and not just a visitor), one of the questions will be "did you pay all US taxes you might have owed".
Overall, I think you just need to consider that your grandmother visited to help with child care and you helped with her travel expenses. She was not an employee and you are not allowed to claim the credit.
You don't have to return the money to the DCFSA account, but since you have a reimbursement but won't have qualified care expenses to report, the reimbursements are added back to your taxable income. But there is no additional penalty in this situation. Turbotax will handle this automatically.
