Hello, I needed to get some clarification on the nanny tax rules while paying a parent living in the same household.
My mother stays with my wife and I in the same household and helps with taking care of our 2 children who are under 8 years of age. I do not claim my mother to be a dependent on my tax returns. My mother does not have any other source of income.
If I pay my mother to help take care of our children - my understanding is that I can just write her a check every week and it will not be subject to tax withholding on my end.
I am not required to generate a W-2 or a 1099 etc to report the payment made to my mother.
I will also be able to claim dependent care credit on my tax returns for this transaction.
My mother will have to file her own tax return where she will report this earned income on her tax return.
Is my understanding of this scenario accurate? Is there something I need to pay attention to - to ensure compliance with all laws and regulations?
Would appreciate some insight and clarification in this regard.
