parent as household employee, W2?

[ae5880]

Hi,
My mother works for me as a babysitter; I'm issuing her a W2 so that she can show some income and reconcile her PTC. I looked into the whole employee vs contractor thing and she is really an employee. The W2 shows no tax withheld (my understanding is that her wages are not subject to social security or federal unemployment taxes). My question is: what, if anything, do I report under state and local wages? I have a federal EIN but no state EIN; we're in Michigan. Her earnings for 2018 were $4,500.

thanks in advance!

 

[LdiJ]

Hi,
My mother works for me as a babysitter; I'm issuing her a W2 so that she can show some income and reconcile her PTC. I looked into the whole employee vs contractor thing and she is really an employee. The W2 shows no tax withheld (my understanding is that her wages are not subject to social security or federal unemployment taxes). My question is: what, if anything, do I report under state and local wages? I have a federal EIN but no state EIN; we're in Michigan. Her earnings for 2018 were $4,500.

thanks in advance!

You are wrong about her wages not being subject to Social Security and Medicare taxes...they are. Please see Schedule H and the Schedule H instructions at irs.gov

 

[ae5880]

You are wrong about her wages not being subject to Social Security and Medicare taxes...they are. Please see Schedule H and the Schedule H instructions at irs.gov

well, I feel pretty good about that part, as per IRS:

"Don't withhold or pay social security and Medicare taxes from wages you pay to:

1. Your spouse
2. Your child who is under age 21
3. Your parent, unless an exception is met"

source: Employment Taxes for Household Employees

same document, under Federal Unemployment Tax Act:

"However, don't count wages paid to your spouse, your child who is under the age of 21, or your parent. "

and finally:
"If you pay wages subject to FICA tax, FUTA tax, or if you withhold federal income tax from your employee's wages, you'll need to file a Form 1040, Schedule H.pdf, Household Employment Taxes. ", same document.

 

[LdiJ]

well, I feel pretty good about that part, as per IRS:

"Don't withhold or pay social security and Medicare taxes from wages you pay to:

1. Your spouse
2. Your child who is under age 21
3. Your parent, unless an exception is met"

source: Employment Taxes for Household Employees

same document, under Federal Unemployment Tax Act:

"However, don't count wages paid to your spouse, your child who is under the age of 21, or your parent. "

and finally:
"If you pay wages subject to FICA tax, FUTA tax, or if you withhold federal income tax from your employee's wages, you'll need to file a Form 1040, Schedule H.pdf, Household Employment Taxes. ", same document.

Your parent meets the exception. Your parent is providing daycare for your child and that meets the exception. Read the instructions for Schedule H line A.

 

[ae5880]

Your parent meets the exception. Your parent is providing daycare for your child and that meets the exception. Read the instructions for Schedule H line A.

Is this the exception you're referring to? If it is, and if I am reading the double negatives correctly, the exception does not apply (the child has no physical or mental condition and I am not divorced), and thus I don't have to count her cash wages towards the $2,100.


Exception for parents.
Include the cash wages you paid
your parent for work in or around your home if both (1) and (2)
below apply.
1.
Your child (including an adopted child or stepchild) who
lived with you was under age 18 or had a physical or mental
condition that required the personal care of an adult for at least
4 continuous weeks during the calendar quarter in which serv-
ices were performed. A calendar quarter is January through
March, April through June, July through September, or Octo-
ber through December.
2.
You were divorced and not remarried, a widow or wid-
ower, or married to and living with a person whose physical or
mental condition prevented him or her from caring for the child
for at least 4 continuous weeks during the calendar quarter in
which services were performed.

 

[LdiJ]

Is this the exception you're referring to? If it is, and if I am reading the double negatives correctly, the exception does not apply (the child has no physical or mental condition and I am not divorced), and thus I don't have to count her cash wages towards the $2,100.


Exception for parents.
Include the cash wages you paid
your parent for work in or around your home if both (1) and (2)
below apply.
1.
Your child (including an adopted child or stepchild) who
lived with you was under age 18 or had a physical or mental
condition that required the personal care of an adult for at least
4 continuous weeks during the calendar quarter in which serv-
ices were performed. A calendar quarter is January through
March, April through June, July through September, or Octo-
ber through December.
2.
You were divorced and not remarried, a widow or wid-
ower, or married to and living with a person whose physical or
mental condition prevented him or her from caring for the child
for at least 4 continuous weeks during the calendar quarter in
which services were performed.

A small child both physically and mentally requires the care of an adult. I know that the wording may make it appear differently, but the exception does apply.