Anonymous wrote:Grandma doesn't have to pay taxes if the amount is less than 1700 or so...Why don't you give that amount to grandma and if there is money left over you can try to work something out with the provider

She won't have to pay taxes, but she will still have to file. It is annoying. best thing to do is to pre-pay current provider although it might overcomplicate her bookkeeping. I agree - these types of accounts are a huge pain.

This is what really annoys me with these accounts.

Grandma doesn't have to pay taxes if the amount is less than 1700 or so...Why don't you give that amount to grandma and if there is money left over you can try to work something out with the provider

Anonymous wrote:Do you lose unused money outright or is it just taxed at your usual tax rate? This might not be a big deal, but you'd want to look into it. Taking a tax hit on a thousand or two is really not that big of a deal.

OP here. I will lose the unused money outright.

Do you lose unused money outright or is it just taxed at your usual tax rate? This might not be a big deal, but you'd want to look into it. Taking a tax hit on a thousand or two is really not that big of a deal.

Pay grandma and have her give a generous gift for Christmas under the gift limit

Anonymous wrote:Yes, as long as she's willing to give you a receipt that you paid her that amount, and pay taxes on it. I did this with my provider. Are you allowed to carry over any into next year? We are allowed to until March 15.

OP again. No we are not allowed to carry over to next year. The payment has to be for care provided in 2014. Let us hope the offer won't make the provider totally suspicious of me

Anonymous wrote:OP - just thought of something - did you have to pay for any waitlist/application fees for this or another daycare? I used my FSA to pay those for the first year because I had my daughter so late in the year.

OP here. I did not know that. Thanks.

Yes, as long as she's willing to give you a receipt that you paid her that amount, and pay taxes on it. I did this with my provider. Are you allowed to carry over any into next year? We are allowed to until March 15.

OP - just thought of something - did you have to pay for any waitlist/application fees for this or another daycare? I used my FSA to pay those for the first year because I had my daughter so late in the year.

Can you prepay the provider for a few months of next year? You'll rack up more than your maximum withholding next year. (My max FSA is $5K and our preschool/daycare cost $15K per year.)

OP here. Grandma does not want the hassle that comes with this money (payroll taxes, possible self-employment status etc...), she just want to play with the kid. I do give her money as gift (no where near what she deserve) but not from the FSA account (and she uses it to to get baby more stuff!).

Pay grandma. If she refuses, I would, tell her to take the money and open a 529.

You can pay grandma for childcare services.

Is this allowed or the IRS will teach me a lesson come next spring?

The long version of the story: I gave birth on February at which point I decided to withhold 4k in my dependent FSA account. The thought was by six months we will get a spot in the daycare since we were on the wait list since 7 weeks pregnant (hahaha - we are still waiting). The baby is home with his grandma (thank you grandma). Now I finally locate a provider starting late October. If I pay her what she is asking I will forfeit a good chunk of money that I would rather give to her. What say you DCUM?