Mom Provides Child Care

  Today TaxMama hears from Scott in the TaxQuips Forum who needs guidance. “My mother in law babysits for me, and I pay her a flat amount every month to do so. Her only job is working for us right now. She needs 3 more years of income to earn enough credits to be fully accrued in Social Security.  What is our best option?  Should we treat her as an independent contractor, or should we issue her a W-2 at year-end?”

 Hi Scott,

IRS Publication 15, deals with employees and payroll. Pub 15 has some special rules when it comes to hiring family. When you hire a parent to take care of your child in your home, you do have to put them on payroll, like anyone else you would hire.  But you don’t have to pay FUTA taxes on their wages.

Since you are married (not divorced, separated, or widowed), all the other payroll taxes apply. Which means, you will be withholding Social Security taxes – and helping her get her three years!

Since your parent is working as a household employee, you can use Schedule H to report the wages and withholding and FICA/Medicare taxes due. Although Schedule H is part of your personal income tax return, you still need to:

a)      Get a Federal employer ID number

b)      Prepare a W-2 and give it to Mom in January.

c)      And you need to register with the state payroll department and file all the usual state payroll tax returns.

Note: Since it’s already December, if Mom has been working for you all year, register with IRS and your state right away to get the ID numbers. File ONE payroll tax return with the state for December wages, treating all the earlier months as advances against the one paycheck.

Perhaps you want to get a tax pro to help you out with this catch-up procdure, at least for this year. You may be able to handle it yourself next year, with a little hands-on guidance. Get on this immediately.

And remember, you can find answers to all kinds of questions about payroll tax issues, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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19 thoughts on “Mom Provides Child Care

  1. Roz says:

    Aloha…I had a client come in yesterday that is married with 4 children;however, his wife ran away to Kansas with his cousin and the 4 children. Even though he has not seen his wife or children for two years, he still has to file MFS ? Yes? …and what about other things like itemized deductions? (What one does the other one needs to do ?)
    (Separate issue,FYI,wife managed to get court ordered child support of $500.00 per month;never heard of mandatory child support,while still married.)
    May the Force be with you.:)
    Roz
    xox
    PS. …he works as a Dishwasher for restaurant in Waikiki, so not a lot of money for legal stuff.

  2. TaxMama says:

    Hi Ron,

    Definitely not in consumer tax software.

    And when it comes to pro software?
    I cannot be certain. There are conflicting reports
    from the different companies about whether or not
    statements go with the electronic file.

    I figure, when it comes to disclosures, I’d rather be safe,
    than be told later on that we did not disclose and a routine, ordinary
    position or computation is disallowed or has to be defended.
    It’s not much more work to print out the return and attach a cover letter, as well.

    But that’s just me.

    Hugs
    Eva

  3. Ron Taryle says:

    Regarding Goran’s question to you today about splitting the COD income with her son (or was it vice versa), I’m not sure I understand why mom would have to paper file her return. Isn’t there usually a place in the software where the 50%-reduced income can make reference to an explanatory note of why only 50% is being reported without losing the ability to e-file?

  4. Roz says:

    Aloha Tax Mama…
    I have new clients, a couple with four children, who went to a local Franchise office Tax Preparer last year and was told that they could only claim 2 of their children; the naive sweet Mom, asked what should they do with the other 2 children and the Tax Preparer told them to “give them to someone that needs them”; the couple “gave” the other 2 children to the Mom’s single brother who filed his taxes with the donated children. ….AND they want to know why I can’t do the same!?:)) I might just file this under “The most outrageous”.:)
    roz x0x

  5. stanley pearlman says:

    RE: Mortgage Interest
    While part of the housing mess was caused by banks/mortgage lenders makiong unqualified loans,I have yet to see any crack down on the lack of information these lenders are making regarding refinancing or home equity loans. Quite a number of taxcpayers are now finding out because of loan limitations on a HELOC and because the money taken out on a refinance was not used to acquire or improve their property, a large percentage of their mortgage interest is no longer deductible. I think people need to write to their Congressman asking them to have the IRS put pressure on the loan industry to have a disclaimer page made up as part of the package, which explains the potentia disallowance.

  6. Terrie says:

    Wow… That sounds wonderful! I will take your advice and appreciate your response. You have certainly made my day better and given me hope for a better tomorrow. Thank you so much!

    Returned hugs,

    Terrie

  7. TaxMama says:

    Dear Terrie,

    At least you still have your sense of humor.

    Why not just apply for a job at the IRS and see what you qualify for?
    Some jobs may not require degrees.
    http://jobs.irs.gov/

    One thing you can do to get experienceand get your Mo-Job back is to become a VITA volunteer.
    http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

    It will get you out there among people, working with tax issues and dealing with the local IRS folks.
    It’s also a way to make contacts – and perhaps get an inside track on job.

    Good luck!

    Hugs
    Eva

  8. Terrie says:

    I am currently disabled due to a breakdown because I chose a bad husband and job. I want to be an Accountsnt for the IRS so badly. Weird goal or dream maybe? But it’s mine and it’s real. I watched losers hide profits from our State and Country and it makes me sick! They don’t ask for much? Neither does Jesus and He paid His taxes! I have 1 year of Office Systems Tech at ICC in Tupelo, MS from 97 I think? And I was working on a home Accounting course through a College up North. Due to the surprise of my husband’s missing $30,000 and the lady he left me for’s new chest….. I was unable to focus and finish the course. I lost my “Mo-Jo”. How do I get it back and what’s the quickest way to work with our IRS and move away from this area of betrayal and start a new more fulfilling life? Lest I die…….

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