A parent is not considered an employee for social security, medicare or FUTA (federal unemployment) taxes. Because employment taxes are not required for your parent, then a Schedule H is not required. Do not check the box for a household employee.
Your mother must report the income on her tax return. You can issue her a Form 1099-NEC for her services, but either way she will pay her own social security and medicare tax as well as any potential personal income tax. The fact that you are not required to pay employer taxes for her or withhold any income tax for her does not negate her responsibility to pay the required tax on income she earned from her services.
She will report the income as self-employment. You will take the credit for child and dependent care for the same amount as long as it doesn't exceed the maximum credit allowed based on number of children.
Parent employed by son or daughter.
When the employer is a son or daughter employing his or her parent, the following rules apply.
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Payments for the services of a parent in the son’s or daughter’s (the employer’s) trade or business are subject to income tax withholding and social security and Medicare taxes.
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Payments for the services of a parent not in the son’s or daughter’s (the employer’s) trade or business are generally not subject to social security and Medicare taxes.
Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply.
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The parent is employed by his or her son or daughter.
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The son or daughter (the employer) has a child or stepchild (including an adopted child) living in the home.
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The son or daughter (the employer) is a widow or widower, divorced and not remarried, or living with a spouse who, because of a mental or physical condition, can't care for the child or stepchild for at least 4 continuous weeks in the calendar quarter in which the service is performed.
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The child or stepchild is either under age 18 or, due to a mental or physical condition, requires the personal care of an adult for at least 4 continuous weeks in the calendar quarter in which the service is performed.
Payments made to a parent employed by his or her child aren't subject to FUTA tax, regardless of the type of services provided.
@Bonoz09
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