About Dependent care flexible spending account
We have claimed the Dependent care Flexible Spending fund for my kid's daycare expenses for two years. But we just found out that parents must be working or actively looking for a job to be eligible for this TAX benefit. My wife have not been working for three years. Although she was trying to find a job, she didn't save any supporting documents such as interview appointments, etc. Now we are filing TAX form for 2009 and I need a help from you about the following questions:
1) Should we pay the tax on this fund that I have accumulated from my payroll?
2) Should we pay the tax only for the fund in 2009 or for the previous three years?
3) If we pay the tax for 2009, is it likely to trigger the auditing on my previous TAX forms?
4) If we also pay the tax for 2007 and 2008, should I include any penalty and how much?
Do appreciate your knowledge and help!