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    #1

    Mom is Nanny

    "(T)Client" = Taxpayer and is Employed
    "(S)Client" = Spouse and is Employed

    "Mother" = (S)Client's Mom

    The following is my understanding:

    - If the mother of (S)Client babysits at my clients' home, the mother is technically a household employee, however, my clients are not required to withhold FICA (Social Security and Medicare) taxes on this income, and the mother will not have to pay FICA taxes as well.

    - The mother will report the income on Form 1040, Line 21 as "other income" not subject to Self-Employment tax.

    - My clients' will not be able to claim the Child and Dependent Care Credit if no FICA taxes are paid by my clients and if no FICA taxes are paid by the mother.

    - If my clients and the mother pay FICA taxes and earnings are reported on W-2, then my clients can claim Child and Dependent Care Credit.

    Is my understanding correct?
    Tags: dependent care credit, household employer, mother, nanny
    #2
    (1) Correct, no FICA is due for this specific Household Employee situation.

    (2) No, it is still "earned income" from wages that go on Line 7 of the 1040. Although they technically don't need to file a W-2/W-3, it will make it easier for Mom if they do file the W-2/W-3.

    (3&4) They should still qualify for the Dependent Care Credit. Did you read something that would imply Social Security and Medicare taxes are required?

    Comment

      #3
      Thank you for your reply.


      Originally posted by TaxGuyBill View Post
      (2) No, it is still "earned income" from wages that go on Line 7 of the 1040. Although they technically don't need to file a W-2/W-3, it will make it easier for Mom if they do file the W-2/W-3.
      Just to clarify, "Wages, tips and other compensation" on the W2 would be the only field with an amount, boxes 3-6 would be zero.


      Originally posted by TaxGuyBill View Post
      (3&4) They should still qualify for the Dependent Care Credit. Did you read something that would imply Social Security and Medicare taxes are required?
      Yes, but not from a credible website. By "credible" I mean, AICPA, TaxAdvisor, etc. I couldn't find anything to further back this up and that's when I decided to post my question on this Forum. This is the website: https://pocketsense.com/pay-mom-baby...urn-19182.html

      Thanks again for your reply.

      Comment

        #4
        Originally posted by PPJCPA View Post
        Just to clarify, "Wages, tips and other compensation" on the W2 would be the only field with an amount, boxes 3-6 would be zero.
        Yes, Box 1 would be the only box filled out.


        I don't see anything credible that requires Social Security and Medicare taxes to be paid to qualify for the Dependent Care Credit.

        Comment

          #5
          Originally posted by TaxGuyBill View Post
          I don't see anything credible that requires Social Security and Medicare taxes to be paid to qualify for the Dependent Care Credit.
          Me either. After all, clergy who opt out of SS get to claim the DCC. You just have to have "earned income" to qualify.

          Comment

            #6
            Originally posted by Burke View Post
            Me either. After all, clergy who opt out of SS get to claim the DCC. You just have to have "earned income" to qualify.
            I believe the question was about whether the care PROVIDER (mom) needed to be paid wages subject to FICA in order for care RECEIVER (taxpayers) to claim the credit.
            "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

            Comment

              #7
              Originally posted by Rapid Robert View Post
              I believe the question was about whether the care PROVIDER (mom) needed to be paid wages subject to FICA in order for care RECEIVER (taxpayers) to claim the credit.
              Thanks, everyone, for you replies.

              RR, per the article I posted, it said, "If you plan on claiming the Child and Dependent Care Credit, then you must supply the Social Security information of your child care provider to the IRS. Because you are claiming this credit, you are no longer exempt from the nanny tax, and your mother will be responsible for reporting her income as well as paying her portion of FICA taxes." So it makes it sound like both the provider and the receiver would have to pay FICA in order to receive the credit. However, as I mentioned earlier, I couldn't find anything to back this up.

              Comment

                #8
                Originally posted by PPJCPA View Post
                RR, per the article I posted,
                I just now went to look at that link. At least they posted links at the end as the source of their information. It looks like the author of your link mis-read a comment from several years ago at the Intuit forum. The Intuit comment did not say FICA payment was required, but the author of the link you posted stated the opposite. They seemed to be confused about the requirement to include a tax ID for the provide on Form 2441.
                "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

                Comment

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