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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: charis on December 14, 2015, 01:42:39 PM

Title: Are there any tax implications for small payment to grandma from FSA?
Post by: charis on December 14, 2015, 01:42:39 PM

My MIL has been watching our child twice a week, at her request, for no payment all year.  Due to an over calculation of childcare costs on my part, my FSA (from which we are reimbursed for our daycare center costs) will have $120 left at the end of this year.   I can't see any reason not to pay MIL with this FSA money for her services (she is eligible under the FSA rules), and I believe that, ordinarily, she wouldn't have to declare this small amount of income (she is retired and has no earned income).  Am I missing anything?

Title: Re: Are there any tax implications for small payment to grandma from FSA?
Post by: MDM on December 14, 2015, 09:21:44 PM

If she has to file anyway, then she should include that income, probably on line 21 "Other Income".

Because it is less than $400 she will not owe self-employment tax.

See https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center.

If there is no other reason for her to file, the $120 itself will not create a reason - unless she was within $120 of the minimum income for filing.

Title: Re: Are there any tax implications for small payment to grandma from FSA?
Post by: charis on December 15, 2015, 05:52:15 AM

That was exactly what I was thinking.  Thank you for the response.