I am thinking of hiring my parent as a household employee. We don't have kids yet. Do I need to pay for my parent's employment tax (social security and medicare)?

[taxsavvy]

Thanks NCPerson,

Mom does actual work back home, taking care of our child who is under 18, Cooking (I travel and my wife has a full time job), Cleaning and taking care of our yard to keep up with HOA regulations. Her wage would be justifiable.

Will look into generating a paystub as a household employee and track performance to keep it in compliance with IRS guidelines. 

Earlier in this thread, there was a question asked if Mom has to pay Social Security and Medicare tax for the wages paid on household work when she filed taxes. I see that i don't have to since parents are exempt.  I did not see a confirmed 'Yay' or a 'Nay' on the same. Could you please advise?

[taxsavvy]

Hi NCPerson,

There is conflicting information on whether MAGI includes foreign income or not. 

Page 2 of the document at https://www.healthcare.gov/downloads/consumer_guide_for_household_income_booklet.pdf  says :

Your MAGI is the total of:

   Adjusted Gross Income (AGI) amount from your household’s federal income tax return

   + Any foreign income excluded from AGI

   + Nontaxable Social Security benefits, including tier 1 railroad retirement benefits

   + Tax-exempt interest received or accrued during the tax year

that means MAGI should include Foreign income excluded from AGI.

However, on the link https://www.healthcare.gov/income-and-household-information/income/ you suggested, it says foreign income is excluded from MAGI used to calculate healthcare benefits. Calling healtcare.gov, their customer services reps don't give a conclusive answer. They simply ask to submit the documents and then wait. 

Is there a way to reconfirm which of the above document holds true in case of conflict?

[NCperson]

well, I've re-read the link and it is deceiving......

https://www.healthcare.gov/income-and-household-information/income/ 

that means the foreign income is to be added to the AGI from the tax return.  it doesn't mean it is excluded from the total.  So the two links you referenced are consistent. 

The bullet below states to add any "excluded foreign income" not "exclude foreign include". 

Your MAGI is the total of the following for each member of your household who’s required to file a tax return:

• Your 
  adjusted gross income (AGI)
   on your federal tax return
• Excluded foreign income
• Nontaxable Social Security benefits (including tier 1 railroad retirement benefits)
• Tax-exempt interest
• MAGI does not include Supplemental Security Income (SSI)

[Opus 17]

@taxsavvy 

There are different definitions of MAGI for different purposes.  "Modified" adjusted gross income means modified for purposes of whichever test or benefit you are looking at.  MAGI for a health insurance subsidy may be different that MAGI for retirement contributions, for example.

If you pay your parent as a household employee, you must issue a W-2 although you are not required to withhold any taxes, including social security and medicare tax.  Your parent is not required to pay those taxes (or self-employment tax) on their tax return.  However, they don't get credit in the social security system for retirement, medical or disability benefits.