I was hired by my sisterinlaw to work for their S Corporation. I was going to get an FSA dependent care benefit but was told that’s not allowable. Is that true?

[brownsarahjoy]

One company was going to set this up but another, when I called for a second opinion they told me since I was a sister in law I couldn’t get FSA Dependent Care. Is there any way around this? I don’t own any part of the company (stock / shareholder). I also can’t find much information on it and most places I call tell me they aren’t sure what I’m talking about. I’m looking for some clarification.

[Anonymous_]

@dmertz ?

[Opus 17]

There are two rules that might be getting in the way.  First, a company can't offer a "section 125" cafeteria benefit plan unless they offer the same benefit to all employees without discrimination.  Second, S-corps can't offer certain tax-free benefits to employees who own 2% or more of the company, or who are "related" to an owner.  If the business offers the plan to its other employees, and if neither you nor your spouse is a shareholder, then I think you probably are eligible, but you need to convince the company's accountant or tax advisor. If there's no plan in place, they can't create one just for you, and you aren't eligible if you or your spouse is a shareholder.