I have children who are cared by their grandmother (spouse wife), however...

Forum|Forum|4 years ago
February 15, 2022
1 reply
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The grandmother lives in our house as well.

Would like to apply money paid to her (~$8,000/yr) towards our dependent care credit.

Is there any issue with this, considering we will enter her ssn & address in? Which, would appear same as ours when she reports with 1099misc/1040.

What I can find regarding,

"A 2: No, the taxpayer does not owe self-employment tax on amounts reported on the 1099-MISC he received from the state agency if he is not engaged in a trade or business of providing day care services, as appears to be the case in this situation. The taxpayer must report the full amount of the payment on line 7a, Other Income, of Form 1040 or 1040-SR."

Not A Product Question

ColeenD3

Level 15

Yes, you can take a credit for the amount you pay her. If you choose, you can treat her like an employee.

You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done but how it is done. If the worker is your employee, then it does not matter whether the work is full-time or part-time nor that you hired the worker through an agency or from a list provided by an agency or an association. It also does not matter whether you pay the worker on an hourly, daily, weekly, or by the job.

Household work is work done in or around your home by the following people:

Babysitters
Caretakers
Cleaning people
Domestic workers
Drivers
Health aides
Housekeepers
Maids
Nannies
Private nurses
Yard workers

If you pay a household employee cash wages of $2,300 or more for 2021, then you need to withhold and report both Social Security and Medicare taxes from their pay. You generally must withhold 6.2% of Social Security and 1.45% of Medicare taxes (for a total of 7.65%) from all cash wages you pay to that employee. You also must pay your share of Social Security and Medicare taxes, which is also 7.65% of cash wages. (Cash wages include wages you pay by check, money order, etc.) Unless you prefer to pay your employee's share of Social Security and Medicare taxes from your own funds, you should withhold 7.65% from each payment of cash wages you make to the employee and pay this amount, along with your matching share, to the IRS.

Additional filing requirements might include Federal Unemployment Tax (FUTA), State Unemployment Tax (SUTA), and Forms W-2 and W-3 for any federal withholding that you did during the year. Also, you'll need to file Schedule H, Household Employment Taxes, with your individual tax return.

[Edited 2/15/2022|9:00AM PST]

kimmelaaronAuthor

Level 2

thank you for your reply.

I was under the impression grandparents providing daycare for parents so they can work would qualify them as exempt.

https://ttlc.intuit.com/community/taxes/discussion/my-child-s-grandmother-is-going-to-provide-day-care-in-my-home-i-know-she-needs-pay-statements-but/00/334439

ColeenD3

Level 15

You are correct. I was looking at a different reference.

Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply..

The parent is employed by his or her son or daughter.
The son or daughter (the employer) has a child or stepchild (including an adopted child) living in the home.
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.
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.

PUB 15