@JBrothers93
Household employee taxes are the equivalent of Social Security and Medicare tax. If you didn’t know, employers almost always withhold 7.65% for these taxes and then match them with an additional 7.65% from the employers‘s funds. For a household employee, you have the option of withholding 7.65% from your employee’s wages and then paying 15.3% on your tax return, (which means you are paying half and the employee is paying half), or you can pay the entire 15.3% on your tax return. The second option is certainly more fair if you have not discussed this in advance. So for starters, you would report in TurboTax that you had a household employee, that you paid them gross wages $3,000, and have TurboTax add the household employee tax to your other taxes.
Then for income tax, you would need to know something about the employee‘s other tax information, such as if they had other taxable income, and if they are married, what their spouse‘s income is. Suppose you determined that this is their only taxable income. In that case, they would owe no income tax and they would be made whole simply by you paying the house all employee tax. Or, suppose you determined that they were in the 12% tax bracket, you could make them whole by giving them an additional $360 wages (before 12/31) and then reporting on your tax return and their W-2 that their gross wages were $3360. When they pay tax on their gross wages, the 12% tax will amount to $360 and so their net take-home pay after taxes would be the original $3000.
Whether this person files their tax return as a resident or non-resident depends on why they came to this country, what type of visa they have, and how long they were in the country in 2021. It’s their responsibility to figure it out, not yours. They will apply for an ITIN when they file their tax return. However, if their total taxable income is less than $12,550, they would generally not be required to file any tax return and so they would never apply for an ITIN.
if you pay the person properly with a W-2 and pay the household employee tax, then you would also be eligible to claim the child and dependent tax credit, although you won’t be able to e-file if the person doesn’t have a TIN. You could file by mail by attaching a written statement explaining that you did pay the person and issue a W-2 but they do not have a TIN yet.
