W-2 - Household Help

Technical topics regarding tax preparation.
#1
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I have a client who has a foreign citizen living in their house as an au pair. This foreign individual is here on a J-1 visa and I presume a student. This foreign individual provides household services to my client (cleaning, household work, babysitting, etc) and my client pays the foreign individual for these services.

The client did NOT issue a W-2 to the foreign individual and I presume did not withhold and remit any kind of taxes during 2020. I believe an au pair fits squarely into the household employee classification and payroll should have been run and needs to be run.

I have no idea how W-2 income of this nature would affect the foreign individual's visa.

Has anyone dealt with a similar situation? Any thoughts on the above?

Please assume wages of more than $2,200 were paid during 2020 and more than $1,000 was paid during at least one quarter of 2020.
 

#2
Joan TB  
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Household help does not need a "payroll". The taxes are calculated and paid to the IRS via the Form 1040-Schedule H. The taxes for the household help are "paid" via either withholding and/or estimated tax payments. They are not specifically designated as taxes for the household help in these two methods, and don't need to be. There is not a requirement to do payroll tax deposits like for Form 941. Schedule H calculates WH/SS/MC and FUTA taxes on the form. Then those taxes get added on Form 1040 as an "other tax". They have either paid in enough or will owe on their Form 1040. The Form W-2 is prepared separately (and the W-3 asks if this is for wages on Schedule H). You may need to separately file SUTA if your states taxes it as well. As I recall, Schedule H instructions talks about how to "gross up the pay" if the payments to the help are considered net.

If you TP has their own Sch C business and runs payroll for that, the household help person can be included in that Form 941, but it would not (of course) be deductible on the business.
 

#3
sjrcpa  
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Did the au pair come through one of the international agencies that do this?
If yes, I believe you will find that no W-2 is indicated.
 

#4
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sjrcpa wrote:Did the au pair come through one of the international agencies that do this?


Do what? Can you clarify " this?"
 

#5
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Thank you Joan. So the federal taxes are due with the 1040 by the original due date of 4/15.

Seems like we'd need to complete the Schedule H or run a calc in January just to issue the W-2 correct?

sjrcpa wrote:Did the au pair come through one of the international agencies that do this?
If yes, I believe you will find that no W-2 is indicated.


By "indicated" do you mean "required"?

Thank you for the information. Do you have a link to any literature or tax authority regarding this? An internet search didn't turn up anything for me...
 

#6
sjrcpa  
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Yellowdog There are agencies that specialize in the recruiting and placement of au pairs. They will have info on the US tax reporting requirements for the "stipend" the au pairs receive. They tout it as a cultural exchange program and not as employment.
Here's one https://culturalcare.com/what-is-an-au-pair/
 

#7
sjrcpa  
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I guess they do get a W-2. Found this on https://www.irs.gov/individuals/interna ... s/au-pairs

Since au pair wages are paid for domestic service in a private home, they are not subject to mandatory U.S. income tax withholding and reporting on Forms 941 and W-2. However, au pair wages are includible in the gross income of the recipients, and au pairs are required to file U.S. individual income tax returns.

At the current wage rate it is likely that the au pair will have an income tax liability on their U.S. individual income tax return because nonresident aliens (with certain exceptions) are not able to claim the Standard Deduction. For this reason, it is recommended that the au pair take one of the following two steps:

File and pay U.S. estimated income tax payments during the year on Form 1040ES-NR PDF (PDF) if the au pair is is a nonresident alien, or on Form 1040-ES if the au pair is a resident alien, or
If both the au pair and the host family agree, file Form W-4 with their host family, indicating on line 6 of such form that the au pair voluntarily wishes a withholding amount of U.S. federal income tax deducted from their weekly au pair wages. The host family will report and pay over this withheld federal income tax on Schedule H of Form 1040. The host family will also issue Form W-2 Wage and Tax Statement to the au pair to report their au pair wages and income tax withholding. The host family will need to apply for an Employer Identification Number (EIN) if it decides to withhold tax and file Form W-2. The au pair will need to apply for a U.S. social security number.
 

#8
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Thanks, sjrcpa, for the clarifications. Good-to-know info.
 

#9
MTS  
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Circling back on this as I have a similar situation. It sounds to me like no W2 is required unless the au pair and the host family agree to do so and submit income tax withholding, yet the au pair will need to claim the income and pay income taxes on their tax return. My client has paid an au pair $7k over the course of 2021 and wants to deduct that as dependent care costs. Would the full amount be deductible and/or is there any other implications to the taxpayer for hosting the au pair? Seems to avoid the household/Sch H issues.
 

#10
JR1  
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They want the deduction, they need to file Sch. H and W2.
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#11
MTS  
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Got it. So if not claiming that deduction and no withholding was done, the host family has no tax obligations, while the au pair needs to file and report those payments as income, correct?
 

#12
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I can send any one an email with a tax guide that one of my clients received this year from the company/organization their Au Pair is sponsored by. DM your email if you want it.
 


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