paying a grandparent for child care


P

plutoman

Hi,

My dad stays with me and takes care of my 3-year old son at home.
Both me and my wife work.

Can I pay my dad for childcare expenses?

Am I then a household employer who has to pay SS & Medicare, etc?
Do I have to issue a W2?

Since he stays with me, is the room and board considered part of the
compensation? (Even if he wasn't taking care of my son, his room and
board would be free in any case)

thanks,
PM
 
J

Jim Kingdon

Can I pay my dad for childcare expenses?

Expenses like gas/food/whatever? Or expenses like his time? Those are
probably quite different in terms of the tax code.
Am I then a household employer who has to pay SS & Medicare, etc?
Do I have to issue a W2?
If you go do this, you can do it on schedule H of form 1040. See

http://www.irs.gov/taxtopics/tc756.html

I don't really know whether it is desirable/necessary/possible in the
case of a family member. Perhaps the above webpage has more
information (I didn't read the whole thing).
 
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P

Phil Marti

plutoman said:
My dad stays with me and takes care of my 3-year old son at home.
Both me and my wife work.

Can I pay my dad for childcare expenses?
Yes

Am I then a household employer who has to pay SS & Medicare, etc?
Do I have to issue a W2?
No on both counts. See IRS Publication 926, pp 3-4 and 8.
Since he stays with me, is the room and board considered part of the
compensation? (Even if he wasn't taking care of my son, his room and
board would be free in any case)
No.
 
P

plutoman

Expenses like gas/food/whatever? Or expenses like his time? Those are
probably quite different in terms of the tax code.


If you go do this, you can do it on schedule H of form 1040. See

http://www.irs.gov/taxtopics/tc756.html

I don't really know whether it is desirable/necessary/possible in the
case of a family member. Perhaps the above webpage has more
information (I didn't read the whole thing).
Thanks for the info.
 
P

plutoman

No on both counts. See IRS Publication 926, pp 3-4 and 8.


No.
Hi

I read through the pages you recommended. Thanks!!!
Exactly the rules I was looking for.

While it says I don't have to issue a W2, how else will this
income be reported to the IRS? Don't the receivers of this
money need to declare it and pay federal & state taxes on it?

Finally, out of curiosity, will income on which you have not
paid SS or medicare, like in this case, count towards the 4
credits per year you accumulate for medicare benefits, etc?
This is the first time I am seeing income where you don't have
to pay SS & MC.

Once again, thanks! I appreciate your help.

PM
 
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P

Phil Marti

plutoman said:
While it says I don't have to issue a W2, how else will this
income be reported to the IRS? Don't the receivers of this
money need to declare it and pay federal & state taxes on it?
Yes. The recipient reports it on line 7 of the 1040, I believe with an "H"
written in. It's covered in the 1040 instructions.
Finally, out of curiosity, will income on which you have not
paid SS or medicare, like in this case, count towards the 4
credits per year you accumulate for medicare benefits, etc?
No. When Congress rewrote the law after Nannygate they arranged it so lots
of household employees don't get any SS/Medicare earnings credit. I thought
it was an outrage, but I seemed to be the only one.
 

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