To clarify, I am asking this question because I am trying to determine if it is best to get a payroll service to pay her and keep up with records for taxes and the Dependent Care FSA reimbursements.
I'm married with children under 13 and my mother will be working from my home. We will be paying over the 2600 threshold, however from what I am reading on the IRS publications 503, 926 and 15 (Circular E) I shouldn't pay or withhold FICA for her wages or pay FUTA.
What I'm unsure of is should I use a payroll service to pay her and if so do I need to have a w-4 for her?
I am going to use the Dependent Care FSA reimbursements from my employer as well. I figured a payroll service would help us to maintain records better but it appears many of them don't understand or account for the parent exception. I could also be misunderstanding or over complicating this. I have an EIN setup already and registered for state unemployment taxes to hire her. Should I just write her checks and issue a W-2, and if so is this sufficient for IRS reporting? I want to claim my FSA benefits and keep things as simple as possible tax wise for my mother and me.
