1

What happens after I list my nanny's personal information with the FSA to claim dependent care reimbursement?

Is this information shared with the IRS and will she be responsible for taxes?

  • To answer your question of whether or not the information is shared, it's typically not shared. The FSA vendor simply vets claims then issues reimbursement or notifies your employer of reimbursement due. This generally doesn't involve the IRS. If you get audited, you better believe they can get that information if they want it. – quid Feb 26 '16 at 22:27
4

If you have a nanny, not a day care center, a nanny you hire, you are responsible for the Nanny Tax, i.e. taxes regarding a household worker. And yes, she's responsible for income tax.

This is not the board to talk about "chances of getting caught," but I'd respectfully suggest you not take advantage of a particular benefit if the rest of the process isn't above board. Claiming the deduction, the FSA, but not handling the rest of the obligation, tax-wise, isn't something to risk.

Yes, the information can be shared, very easily.

  • Is there any duty of the employer to withhold and remit the nanny's income tax? – DJohnM Feb 27 '16 at 0:24
  • The withholding has to be offered. Employer has to report the payments, withhold and pay both sides of FICA, but employee can either have tax withheld or pay quarterly. – JoeTaxpayer Feb 27 '16 at 0:47

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