I have a client who paid a $6k fee to enter a program where a foreign au pair stays with them "as a family member" and gets a $139.05 weekly "stipend". The au pair website seems to imply that this person is NOT a household employee and is not responsible for paying taxes. This translates to my client that SHE does not have to pay employment taxes on schedule H for this "family member".... Here are my questions: I think this person IS a household employee subject to ss, medi, futa and suta... does anybody agree? Does anyone think the $6k program fee can be added to the weekly stipend to get the amount paid towards the child care credit? What if the au pair does not have a proper visa (?) to "work" in the US?
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IRS Pub 926, page two says:
"If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee."
This is a grey area. For the au pair website to imply the person is not a household employee, they would have to make the claim they are an agency that provides workers for you, and that they control the work being done rather than you. However, if the agency finds workers for you, but then you control all the work being done, this exception to the household employee rule would not apply.
As far as the child care credit is concerned, the expense of having the kid cared for would qualify for the credit whether or not the worker is a household employee, independent contractor, or agency provided worker.
As to the illegal alien issue, obviously you would not want to get involved with that. If they are not allowed to work in this country, don't go messing with trying to claim any kind of tax credit for it. -
Example—Indirect Expenses (1)
In 2004, L pays a fee to an agency to obtain the services of an au pair to care for his qualifying children to enable him to be gainfully employed. The au pair begins caring for L's children in 2005. The fee paid in 2004 may be an employment-related expense. However, L may not take the expense into account until 2005, when the au pair first provides the care.49.2
49.2 Prop. Regs. §1.21-1(d)(12), Ex. (5).Comment
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