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

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[quote=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.
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