You can answer No to that question and you don't need to complete the Nanny Tax (Schedule H) section in TurboTax (unless there is an exception, see below). You or your spouse's parent is exempt from the FICA requirements. Your MIL reports the income on her federal tax return.
Don't withhold or pay Social Security and Medicare taxes from wages you pay to:
- Your spouse,
- Your child who is under age 21,
- Your parent, unless an exception is met, or
- An employee who is under age 18 at any time during the year, unless performing household work is the employee's principal occupation. If the employee is a student, providing household work isn't considered to be his or her principal occupation.
See Publication 926 for more information on these exceptions. (page 6) @swkwan006
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