It’s that time of year when I get bombarded with questions from au pairs and host families about their tax returns. First of all, I just want to remind you that I am not an accountant. And just as you wouldn’t ask me for medical advice because I’m not a doctor, please understand that I am not an authority on taxes.
Now, that being said, I am happy to share my knowledge with you, based on my own research and experience as both a LAR and a previous host family. However, I want to caution you that tax laws are subject to change, so I will also show you where you can find the appropriate information on the IRS’s website which you may refer to for the latest, most authoritative answer.
Here are some of the common questions asked by host families and au pairs.
1. Q: Are au pair wages subject to federal income taxes? A: Yes, the IRS has determined that the au pair’s stipend is considered wages, and therefore subject to federal income taxes.
2. Q: Does the host family have to withhold federal income taxes and issue a form W-2 to their au pair? A: No. Because the IRS considers the au pair stipend to be ” paid for a domestic service in a private home, they are not subject to mandatory tax withholding and reporting on form 941 and W-2.” If both the au pair and host family agree to have taxes withheld from the au pair’s weekly stipend, then the host family could collect taxes up front and report them on form W-2. (This is not common).
3. Q: Does the au pair have to pay estimated quarterly income taxes? A. No. Because it is unlikely that an au pair’s tax burden will be more than $1,000, he/she is not typically required to pay estimated quarterly taxes.
4. Q: What form should an au pair complete to file his/her taxes? A: Au pairs typically file form 1040NR-EZ. (Download Directions.)
5. Q: If the host family doesn’t have to issue form W-2 to the au pair, how does the au pair know what her wages were? A: If the au pair has not kept a record of wages earned, it is easily calculated by taking the weekly stipend (typically $195.75/week) and multiplying that by the number of weeks the au pair worked in the US in 2012. Enter that amount on line 3 of form 1040NR-EZ.
6. Q: Will the au pair owe money? A: That depends on when he/she arrived in the US. Complete the form to determine if money is owed. Submit the signed form whether money is owed or not.
7. Q: What will happen to the au pair if he/she does not pay US income taxes? A. It is my understanding that, if an au pair owes US taxes and does not pay them, it may affect his/her ability to obtain a visa to visit the US in the future. If the au pair does obtain a visa and has an outstanding tax obligation, he/she may be required to pay the tax bill plus penalties. (There could be other consequences that I am unaware of.)
8. Q: Are au pair wages subject to social security and medicare tax withholding? A. In most cases, au pair wages are not subject to social security and medicare tax withholding because of the au pair’s status as a J-1 nonimmigrant and nonresident alien. If an au pair was in the US prior to becoming an au pair (other than as a tourist), he/she may be considered a resident alient, and might be subject to social security and medicare tax withholding. This is very uncommon. Check here if you think this might apply to you/your au pair: http://www.irs.gov/Individuals/International-Taxpayers/Alien-Liability-for-Social-Security-and-Medicare-Taxes-of-Foreign-Teachers,-Foreign-Researchers,-and-Other-Foreign-Professionals
9. Q: Is the fee paid by the host family to Go Au Pair deductible by the host family as a qualified childcare expense? A. In my experience, it typically is. (Caution: fees are typically deductible for the tax year that the services were received, not when the fees were paid. For example, if you paid your fee in December, 2012, but the au pair did not arrive until January, 2013, the fee would be deductible on your 2013 taxes. Consult a tax professional if you need clarification.)
10. Q: Is the weekly stipend paid to the au pair deductible by the host family as a qualified childcare expense? A. In my experience, it typically is. (Childcare expenses are usually deductible as long as childcare was provided while both host parents were at work or looking for work.)
These are the most common questions asked by au pairs and host families. Please refer to the IRS website, or consult a tax professional before filing your taxes.
Here is a link to the page on the IRS website that explains most of this information: http://www.irs.gov/Individuals/International-Taxpayers/Au-Pairs.
If you would like to contact the IRS for telephone assistance, you can find the number here: http://www.irs.gov/uac/Telephone-Assistance.
Go Au Pair Boston 