@pasknyc wrote:
The question is not whether grandma would report the income - she would because FSA funds are being used. The question is HOW she would report it. As Other income because there is no profit motive and therefore it's not a business activity, or as Schedule C/ self employment
Bottom line - she can report it anyway that she wants, but if *you* deduct it as child-care expenses on your tax return with your mom's SSN as the child care provider then if she does not report it on a schedule C and pay the SE tax, it is a 80% probability that she will receive an IRS audit letter in a year or two asking for the schedule C and SE tax and a big bill for back interest. Your deducting it as child care makes her a child care provider by definition whatever she wishes to call herself.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
