Can my fiancé claim me as an employee on his taxes for this coming up year? instead of paying a day care he pays me,will this be acceptable? He does make monthly payments

[mbfo13]

I work 8hr paid for 5 days. We have file togetherthis past 2 yrs. as his defendant. But this is the first year  where we implicated this.

[SweetieJean]

<a rel="nofollow" target="_blank" href="https://www.irs.gov/taxtopics/tc756.html">https://www.irs.gov/taxtopics/tc756.html</a>

[SweetieJean]

Would you be watching your own children?

[SweetieJean]

"We have file together ,him claiming me as a defendant for the last 2 years now." Did you have any income of your own for the past two years?

[mbfo13]

Thank you for that link reference. And yes, there my children as well. And the last 2yrs not really last yr. Imade less than $400.

[SweetieJean]

Okay, so why have the children been going to daycare?

[Opus 17]

So yes, he can pay you, but he can't use it as a tax deduction, and you both will pay tax on it (you, income tax and him, household employer tax).

[SweetieJean]

So she gets Social Security credits for babysitting her own children in the home that they all share? That makes no sense.

[Opus 17]

Because he pays the tax into the system.  I could be wrong, @bwa might be the best person to comment.

[SweetieJean]

and she might also qualify for EIC.  But I wonder why they are even considering doing this.
@mbfo13 You cannot "file together" if you are not married.

[Opus 17]

It sounds to me like a scheme to use an FSA and make some of his income tax free.  I didn't think about EIC, that would definitely (probably) be viewed as fraud.

[SweetieJean]

Let's see what BWA says.

[Opus 17]

1. He can pay to watch your own children but he can't use that to claim the dependent care credit or use an FSA.  The credit is disallowed when the caregiver is a close relative.

2. If you are not married, and these are his children but not yours, then yes he can pay you to provide day care and claim the credit or use an FSA.  But, this means that:

•You are his household employee.  He has to withhold or pay household employer taxes on his tax return (basically, social security and medicare tax) and he has to issue you a W-2.

•You have to file a tax return to report the income.  If this is your only income, you won't owe tax unless the amount is more than $12,400, but you should file.

•He can't claim you as a dependent if your taxable income is more than $4050.

•If you get married at any time in the future, then his children become yours for tax purposes for the entire year.  Even if you marry on December 31, then the children are your children and any salary he paid you during the other 364 days would become ineligible for the FSA or dependent care credit.

[SweetieJean]

He can pay her to watch HER own children?  Why would they be going to daycare anyway if they have a stay at home parent (her)?

[Opus 17]

I don't see any reason why he can't pay her to do anything he wants (watch kids, clean house, etc) as long as he pays household employer taxes and issues her a W-2, and she reports the income on her own return.

However, as noted, he can't then claim her as a dependent, and any wages he pays for child care to a related caregiver are NOT eligible for the dependent care credit or the use of an FSA.  

So it's legal, but it's dumb, and will cost money for no benefit.