grandparent babysitting my child in my home and using dependent care FSA account to pay

[kasey458]

My mom lives with me and will be watching my child in my home. I wanted to pay her using my work's dependent care FSA account. What taxes will she have to pay? FICA? federal? state? Would she be exempt from FICA because she is the grandparent or does that not apply since I would be using the dependent care account? 

[VolvoGirl]

Does your mom  have other income or do you claim her as a dependent on your return?

[ghost]

Your mother will be a household employee. She must pay income taxes and FICA taxes. You may be required to withhold and regularly submit those taxes. You may be required pay workers' compensation insurance.

https://www.nannychex.com

[Hal_Al]

Yes, the grandparent is exempt from FICA tax, if she babysits in your home.  She still needs to pay income tax, since you are using the FSA account (or if you were claiming the dependent care credit).

You do not need to do 'nanny tax" paperwork (the grandma exception).

For details on how your mother reports her income, see https://ttlc.intuit.com/community/tax-credits-deductions/discussion/i-m-retired-and-on-ss-i-took-car...

[kasey458]

No I do not claim her as a dependent. She does not have other income but my dad does. 

[kasey458]

So she would still be exempt from FICA taxes if I used the dependent care FSA to pay her? That is the question I can't seem to find an answer to. 

[Hal_Al]

Yes, she exempt from FICA tax even though you are using FSA.  She would also be exempt if you were claiming the day care credit. 

There is an exception: the parent is subject to FICA if both the following conditions apply: A) Your parent cares for your child who is either under the age of 18, or has a physical or mental condition that requires the personal care of an adult for at least four continuous weeks in a calendar quarter. B) You marital status is one of the following: You are divorced and have not remarried; you are a widow or widower; or you are living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least four continuous weeks in a calendar quarter.

Reference: https://www.marketwatch.com/story/tax-rules-for-hiring-family-members-2012-03-27