Hello,
I live in Massachusetts and I am about to start paying for my Grandchild's nanny. My grandchild lives in Illinois. Since I am paying the wages, am I considered the Household Employer even though I do not head the household where he is cared for. I assume I should pay SS tax, medicare tax, Il state tax and any required federal or state unemployment insurance. Am I missing something here?
Thanks
In order for the parents to receive child care credit they should pay the nanny assuming that they are otherwise eligible. It would be better for you to gift them the money to pay for the nanny and let them be the employer.
Will you be paying the nanny directly, or will you be sending money to the parent(s) so that they can pay the nanny? As Bsch4477 said, it would be better all around for you to send the money to the parent(s).
You need to give the money to the parents, and they will be responsible for paying the nanny, and withholding and filing household employee's tax.
If you directly hire this person, you are not a household employer, you are a regular employer (because the worker is not working in your home.). You would essentially be acting as an employment agent. You would need an employer identification number, and you would need to withhold state and federal income tax, social security and medicare tax, unemployment insurance, worker's compensation insurance, and who knows what else. There may be other state requirements like minimum wage, or required documentation and benefits. It's going to be way too complicated to go through.
If your child can't be trusted to handle money and do the paperwork correctly, it would be better for them to hire a nanny through an agency. The nanny is an employee of the agency, so the agency handles all the paperwork, and you can pay the agency directly with no paperwork requirements on your end.