I hope I'm not misunderstanding posting guidelines, i.e. location, questions etc. My wife and I have hired a person to watch our children in our home. We have paid her X dollars so far this year. My wife has a FSA dependent care account that now has $2800 available. We are completely ignorant to our responsibilities as "employers" of our "domestic employee." From what I understand, we should be paying the appropriate taxes (medicare, Soc. Sec., Federal & State unemployment?) taxes for both employee and employer, meaning we are expected to pay this % on top of her X salary (it looks like this will come out to be about 15%). So imagine we have paid her $3000, we owe $450 in taxes (about). These taxes have nothing to do with the FSA account correct, i.e. the FSA being tax deferred doesn't mean we are exempt from domestic employee/employer taxes? In other words if we submit a receipt for the FSA $2800 reimbursement with her Soc. Sec. # (EIN) the govt (state and fed) will be looking for the taxes we owe right? What do i need to do now in order to make this all legal? I'll admit that I feel really stupid right about now to think that for some reason I would not have to pay the taxes because the FSA was "tax deferred." I'm sorry for my incompetence and I hope you could shed some light on the situation. Thanks taxguru! You're our only hope!