What is the name of your state (only U.S. law)? Wisconsin
I elected a $1,200 contribution to the Dependent Care FSA for 2017. We have a child in nursery school two days per week. I may have misunderstood the DCFSA rules at the time, but when I made the election it was with the expectation that my wife would begin working from home in 2017. She has since decided to stay a full-time parent and did not have an earned income in 2017. (She had previously planned on reselling up-cycled/refinished furniture as a "side job", but this never coalesced). My 2017 W-2 box 10 shows the $1,200 benefit (that was exempt from pay-roll taxes, etc.).
My questions are:
How do I handle this on my 2017 tax return? If the IRS sees the $1,200 dollar election from my W-2 but no earned income for my spouse will we face a penalty? Be audited?
My understanding is that even if she started a business she would have had to show a net profit of at least $1,200 on her Schedule C in order for us to legally claim the $1,200 tax exemption. Is this correct?
Thank you for any advice you can offer.
I elected a $1,200 contribution to the Dependent Care FSA for 2017. We have a child in nursery school two days per week. I may have misunderstood the DCFSA rules at the time, but when I made the election it was with the expectation that my wife would begin working from home in 2017. She has since decided to stay a full-time parent and did not have an earned income in 2017. (She had previously planned on reselling up-cycled/refinished furniture as a "side job", but this never coalesced). My 2017 W-2 box 10 shows the $1,200 benefit (that was exempt from pay-roll taxes, etc.).
My questions are:
How do I handle this on my 2017 tax return? If the IRS sees the $1,200 dollar election from my W-2 but no earned income for my spouse will we face a penalty? Be audited?
My understanding is that even if she started a business she would have had to show a net profit of at least $1,200 on her Schedule C in order for us to legally claim the $1,200 tax exemption. Is this correct?
Thank you for any advice you can offer.