Tax question - hiring my mom for childcare, and pay her with FSA money?

[Anonymous]

Hi there,
Does anyone have info on whether I can hire my mom for childcare, and pay her with FSA money? I know I'd have to pay social security on her, and she would have to claim it as income (not a problem, as she is a senior and has very little income). I assume this is a net benefit because I wouldn't pay income taxes (my AGI is 220K a year). Am I thinking about this right?

I'd also have to pay DC unemployment taxes, I know.

Anyone done this? Thanks for any thoughts.

[Anonymous]

It can be done, but you'll be better off talking to professional about that rather than anonymous form just my 0.02

[Anonymous]

She has to have a tax id number.

[Anonymous]

OP - Benefits for your mother, such as HEAP, Food Stamps, etc., would be affected.

[Anonymous]

Her SS# is her tax ID number, you will have to have an EIN.

My understanding is that as long as someone has a social security number you can pay them for child care with your FSA.

[Anonymous]

As long as you follow the rules for an on-the-books nanny, whether or not she's your mother shouldn't be an issue, I would think.

[Anonymous]

As long as you don't claim her as a dependent.

[Anonymous]

You can gift a relative 15k a year.

[Anonymous]

Here is what I think based on my limited experience with Household employees (what the IRS calls nannies, house cleaners, etc...). First, The fact that she is your mother is irrelevant.

That is, like any other household employee, you have to:
- Get an EIN number from the IRS (simple IRS online request)
- Pay unemployment insurance to your state (the method is state dependent) and federal (done on your taxes at the end of the year) for any quarter your payments exceed 1K.
- Pay SS taxes for any year you exceed 1.8K (you are responsible for withholding her half of SS taxes and paying it with your taxes at the end of the year).
- Make sure you are paying minimum wage and time and half for overtime (I think DC Checks this information).
- Issue her W2 at the end of the year (can be done at the SS website using your EIN).

she have to:
- if the total are large enough that she will owe taxes to the state or federal, then she is responsible for paying estimated taxes during the year
- Finally, Your mother have to include all of this income in her tax filing (based on the W2 you provided).

As someone already mentioned you can gift up to 15k per year without tax ramifications but you can not use FSA money for that since your employer reports where that money goes and it will be considered income.

I suppose you can pay her up to 5K to get the tax benefit (and do all the above), then gift her the rest as a thank you for her support up to the gift tax limit. Is it legal? I do not know.

If this sounds overwhelming, pathetically I like the stuff and I do not mind if IRS comes knocking if I screwed up, then get a professional to help you.

[Anonymous]

Anonymous wrote:Here is what I think based on my limited experience with Household employees (what the IRS calls nannies, house cleaners, etc...). First, The fact that she is your mother is irrelevant.

That is, like any other household employee, you have to:
- Get an EIN number from the IRS (simple IRS online request)
- Pay unemployment insurance to your state (the method is state dependent) and federal (done on your taxes at the end of the year) for any quarter your payments exceed 1K.
- Pay SS taxes for any year you exceed 1.8K (you are responsible for withholding her half of SS taxes and paying it with your taxes at the end of the year).
- Make sure you are paying minimum wage and time and half for overtime (I think DC Checks this information).
- Issue her W2 at the end of the year (can be done at the SS website using your EIN).

she have to:
- if the total are large enough that she will owe taxes to the state or federal, then she is responsible for paying estimated taxes during the year
- Finally, Your mother have to include all of this income in her tax filing (based on the W2 you provided).

As someone already mentioned you can gift up to 15k per year without tax ramifications but you can not use FSA money for that since your employer reports where that money goes and it will be considered income.

I suppose you can pay her up to 5K to get the tax benefit (and do all the above), then gift her the rest as a thank you for her support up to the gift tax limit. Is it legal? I do not know.

If this sounds overwhelming, pathetically I like the stuff and I do not mind if IRS comes knocking if I screwed up, then get a professional to help you.

You only need to worry about the 15k if your state will be more than 5 million. Even if you do have more than five million you just file some paperwork and that amlubt is subtracted from how much you can give.

[Anonymous]

You need to just gift your mom money. Do not hire her as an employee. She watches your kids for free. You give her x dollars as a vhrismtas present.

[Anonymous]

Are you asking because you would be using FSA employer funds to pay your mom, or because you want her to be able to gain social security benefits for her child care service?

If the answer is no, just pay her as a gift and save yourself and her a lot of paperwork.

[Anonymous]

Anonymous wrote:You can gift a relative 15k a year.

Yes, tax free. You can actually give it
To anyone.

[Anonymous]

The fact that she is your mom is not irrelevant. There are a lot of weird rules about paying a relative to watch your kids.

Also I thought OP was trying to get the tax deduction for an FSA so giving her mom money doesn't solve that (and although you can gift people money that doesn't mean you can have someone watch your kids and then give them $10k and call it a gift).

[Anonymous]

Anonymous wrote:Here is what I think based on my limited experience with Household employees (what the IRS calls nannies, house cleaners, etc...). First, The fact that she is your mother is irrelevant.

That is, like any other household employee, you have to:
- Get an EIN number from the IRS (simple IRS online request)
- Pay unemployment insurance to your state (the method is state dependent) and federal (done on your taxes at the end of the year) for any quarter your payments exceed 1K.
- Pay SS taxes for any year you exceed 1.8K (you are responsible for withholding her half of SS taxes and paying it with your taxes at the end of the year).
- Make sure you are paying minimum wage and time and half for overtime (I think DC Checks this information).
- Issue her W2 at the end of the year (can be done at the SS website using your EIN).

she have to:
- if the total are large enough that she will owe taxes to the state or federal, then she is responsible for paying estimated taxes during the year
- Finally, Your mother have to include all of this income in her tax filing (based on the W2 you provided).

As someone already mentioned you can gift up to 15k per year without tax ramifications but you can not use FSA money for that since your employer reports where that money goes and it will be considered income.

I suppose you can pay her up to 5K to get the tax benefit (and do all the above), then gift her the rest as a thank you for her support up to the gift tax limit. Is it legal? I do not know.

If this sounds overwhelming, pathetically I like the stuff and I do not mind if IRS comes knocking if I screwed up, then get a professional to help you.

In DC, you also need to get worker's comp insurance for household employers. And I didn't see withholding of federal and state taxes on here either.