Grandparent providing childcare (2022)

[swkwan006]

I am currently working on our 2022 income taxes through Turbo Tax Online. I have paid my mother-in-law (grandparent) in 2022 to watch our child during the summer and winter breaks at our home. My wife and I paid her over $2400, and I filed a claim to get reimbursed for this through DCFSA. I reported this in Turbo Tax through the "Deductions & Credits" >> "Dependent Care Credit" section. My question is for the "Other Tax Situations" >> "Nanny and Household Employee Tax" section. There is a question about whether or not I need to report household employment taxes paid by me or jointly with my spouse. Do I simply answer "No" since my mother-in-law is exempt from FICA? If I answer "Yes", it asks me for an EIN number and amount subject to FICA taxes. Or do I simply ignore this section altogether (delete Schedule H-T)?

[ErnieS0]

Whether or not you have to file Schedule H depends if your mother-in-law was a household employee.

Household employees commonly include housekeepers, maids, nannies and babysitters if you control which tasks they're responsible for and how they complete them. It essentially depends on the facts and circumstances of each situation. 

But if you have a nanny who lives in your home and takes care of your children five days per week, she's more likely a household employee than the plumber you call a few times per year.

See Do You Have a Household Employee?

[swkwan006]

Thanks for the analogy. I guess from the same IRS document that was linked, I was under the impression if we were paying anyone to watch our child in our home, they're considered a household employee, but since they are a parent (i.e. wife's mother) and my wife and I are not divorced, then the wages should not be counted/are exempt from paying employment taxes. I'm just trying to determine what is the correct way to track that in Turbo Tax.

[DawnC · Accepted solution]

If the wages are exempt, they don't get reported on Schedule H.   From the Schedule H instructions, page 5:

Line A. Did you pay any one household employee cash wages of $2,400 or more in 2022?  To figure the total cash wages you paid in 2022 to each household employee, don't include amounts paid to any of the following individuals. 

• Your spouse. 

• Your child who was under age 21. 

• Your parent. (See Exception for parents below.) 

• Your employee who was under age 18 at any time during 2022.  If the employee wasn't a student, see Exception for employees under age 18.

Exception for parents. Include the cash wages you paid your parent for work in or around your home if both (1) and (2) below apply. 

1. Your child (including an adopted child or stepchild) who lived with you was under the age of 18 or had a physical or mental condition that required the personal care of an adult for at least 4 continuous weeks during the calendar quarter in which services were performed.  A calendar quarter is January through March, April through June, July through September, or October through December. 

2. You were divorced and not remarried, a widow or widower, or married to and living with a person whose physical or mental condition prevented your spouse from caring for the child for at least 4 continuous weeks during the calendar quarter in which services were performed.