We will be hosting an Au Pair who will provide child care service Jan 15 2024 to Jan 14 2025.
As many people know Au Pair cost overall consists of two major fees (1) A large single payment to agency (2) weekly stipend to au pair. We got to know both of these are eligible for DCFSA.
The agency fee of $10595 needs to be paid a month before i.e. December 2023.
We want to use 2023 DCFSA 5k to reimburse for the agency fee. IRS pub 503 https://www.irs.gov/publications/p503#en_US_2021_publink[phone number removed] says:
Expenses prepaid in an earlier year.
If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Claim the expenses for the later year as if they were actually paid in that later year.
So since agency fee is prepaid we can only claim it after the au pair service is rendered i.e. after Jan 2024. The DCFSA 2023 timeline says that the expense must be incurred between Jan 1 2023 - March 15 2024 (grace period) and the deadline to file for receipt/claim is April 2024.
So I am wondering if the agency fee of $10595 needs to be prorated for the period of Jan 2024 - March 15 2024 and then claimed against 2023 DCFSA or can I claim full 5k of 2023 DCFSA for agency feee?
I will be filing my 2023 Tax return using TurboTax Home and Business Desktop Software.
I found two previous discussion around this here and they are conflicting:
1. https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-au-pair-upfront-fees/01/18511...
2. https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-to-claim-au-pair-upfront-fee...
