Hello, with the summer break approaching we are thinking of enlisting the help of my wife's parents to look after the kids. The kids are both under 10 and both me and the wife have full time jobs. Grandparents live fairly close by so we can either :
1. Have them come over to our house during the day (household employee scenario)
2. Drop the kids off at their house (independent contractor scenario)
I realize that since they are grand parents, there are some exemptions available to make things easier and that's there where things get muddled from what I have been researching.
Can someone please detail out the requirements for both parties (us and the grand parents) for withholdings (FICA & Income Tax), documentation to be issued (W-2, 1099-MICs) and any other considerations eg nanny tax.?
Also, how do these requirements change if we decide to claim Child Care tax credit on form 2441 for the money payed to them?
Our first priority is keeping things simple and second priority is saving on taxes. We don't mind forgoing a couple or so hundred dollars in tax savings if it keeps things simple and straightforward for both parties.
