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blackaj83
New Member

My mother watches my children and I pay her. I didn't know how to go about claiming the nanny tax and how would she file that money on her taxes.

 
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3 Replies
MiriamF
Intuit Alumni

My mother watches my children and I pay her. I didn't know how to go about claiming the nanny tax and how would she file that money on her taxes.

If you paid your mother and you want to claim the child care credit, you must report her social security number and she must pay tax on that amount.

The next question is, did she work at your house or at her own residence?

Ordinarily, if you have a household employee, and you paid that employee more than $2000, then you are supposed to pay payroll taxes (6.2% Social Security and 1.45% Medicare), and you must withhold 7.65% of your employee's wages and pay all that to the IRS. This is reported on Schedule H of Form 1040. You don't have to withhold federal income tax unless your employee asks you to. You would provide Form W-2 to your employee.

Your mother would then report the income on her tax return. If she is living with you at your convenience, then she does not have to report room and board as income. See below for information about taxes and household employees.

https://ttlc.intuit.com/replies/3302336

If your mother is providing care at her own residence, then it might be better for her to be self-employed. You would pay her using form 1099-MISC, and she would be able to deduct expenses for food, toys, transportation and the use of her house. She would have to pay 15.3% self employment tax plus income tax on the net income, after expenses. All of this would be reported on Schedule C.



blackaj83
New Member

My mother watches my children and I pay her. I didn't know how to go about claiming the nanny tax and how would she file that money on her taxes.

We reside at the same resident but are separate.  I have a EIN number so how do I make a W2?  So I don't claim it under child care expense?
MiriamF
Intuit Alumni

My mother watches my children and I pay her. I didn't know how to go about claiming the nanny tax and how would she file that money on her taxes.

If she is working in your home and does not have her own company, then you can pay her as a household employee. You can either get a free W-2 form by requesting one to be mailed from the IRS, or you can pay for one using TurboTax Quick Employer Forms either through the TurboTax Online Self-Employed version or logging into <a rel="nofollow" target="_blank" href="http://quickemployerforms.intuit.com">http://quickemployerforms.intuit.com</a>. You can pay the payroll taxes either by creating an EFTPS account with the IRS at <a rel="nofollow" target="_blank" href="http://www.eftps.gov">www.eftps.gov</a> or by filing IRS forms 940 and 941 (available at irs.gov) and enclosing the payment. You will need to file Schedule H with your tax return. You will also need to file your state's unemployment tax form.

If you don't want to go to all this trouble, you can pay her with a 1099-MISC. You can also do that either by getting a free form mailed to you by the IRS (takes about 10 business days) or by using TurboTax QEF.

Either way, you will be able to take the child care credit, but you need to choose one way or the other to pay your mother. If you don't send her a 1099-MISC, she will still be able to report that you paid her in cash. But the first way, with a W-2, is the way it *should* be done.

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