ABC of Tax time

Tax Information for Au Pairs and Host Families

Tax Day is April 15th

We all know that the issue of taxes can be confusing regarding the au pair program, so here are some

general  guidelines regarding childcare tax issues. I hope this information will provide a resource for you to prepare for a conversation with your own tax advisor or the IRS. Please consult with your personal tax advisor or the IRS for definitive answers regarding your own situation.

For the Host Family:

Child and Dependent Care Tax Credit:

As long as a Host Family needed the au pair’s child care services in order to work or look for

employment, the stipends paid to au pairs, the costs of room and board, and the program fees paid to

your agency are all eligible under the Child and Dependent Care Tax Credit.

Contact your employer for specific guidance on this issue.

Reporting for My Au Pair’s Taxes Host families usually do not need to pay federal unemployment tax (FUTA) for their au pairs. Host families are not required to withhold taxes unless the au pair (employee) requests that taxes be withheld and the host family (employer) agrees to do so.

For the Aupair:

The au pair is responsible for declaring her/his own income, submitting a tax return and paying taxes.

The IRS does not hold the host family responsible for an au pair’s failure to file a return nor for any

unpaid tax bill that may result from a filing. However, your au pair will need some record of the

stipend payments received from you, so please be sure to use a form of receipt for your aupair to use. A form documenting when and how much he/she was paid.

Because the IRS considers an au pair to be an “employee” of the host family, au pairs are required to file U.S. individual income tax returns even though many au pairs will not owe taxes.

By April 15, the au pair should use Form 1040EZ or Form 1040NR to report his/her au pair wages for the previous calendar year. (e.g. on April 15 2012, tax returns are due for wages earned between January 1 and

December 31, 2011.) You will need some record of the stipend payments you received from your host

family, so create a receipt form to use. If an au pair receives more than $3,650 in weekly stipends during a calendar year (January 1 through December 31), s/he is required to pay income tax with the exception of Social Security and Medicare taxes. Depending on what time of the year the au pair arrives, it is possible that he or she will make below the minimum amount required for taxation in that year. Often, au pairs who are in the United States for less than 4 months in a calendar year do not owe taxes.

Au pairs should plan ahead to have funds available in April when they submit their tax returns. (Taxes

on income earned between January 1 through December 31 are always due on the following April 15.

Long lines at the post office on April 15 to mail tax returns are an American tradition!) Au pairs who

have already left the United States by April 15 may submit their tax return early before they go, or

they can submit it online using the third party services listed below.If an au pair wants the host family to withhold taxes from the weekly stipend, s/he must ask the host family to do so. Otherwise, the host family will not withhold taxes, and the au pair will need to have funds available for payment of taxes due, if any, at the end of the year. Au pairs are not eligible for the Earned Income Tax Credit, the Hope Credit or the Lifetime Learning Credit. An au pair is not really a "student" in the United States, and therefore is not eligible to exclude his/ her au pair wages from gross income under the student article of any U.S. income tax treaty.

The information above applies to most au pairs, because most au pairs are considered “non-resident aliens.” However, if the au pair had previously been in the United States as a student, teacher, trainee, or researcher in F, J, M, or Q nonimmigrant status before becoming an au pair, then the au pair might be considered a “resident alien” during his/her current stay in the United States. In this case, the host family and au pair should consult a tax advisor, as the host family may need to withhold

Social Security and Medicare taxes and pay Federal Unemployment Tax (FUTA).

Additional Resources:

IRS forms for au pair tax returns:

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Form 1040NR-EZ:

Nearly all au pairs can use this form to submit tax returns.

 http://www.irs.gov/pub/irs-pdf/f1040nre.pdf

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Instructions:

http://www.irs.gov/pub/irs-pdf/i1040nre.pdf

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Applying for a Social Security Number for J-1 Visa holders:

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http://www.ssa.gov/pubs/10181.html

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Internal Revenue Service:

www.irs.ustreas.gov.org  1-800-829-1040 within the US or 267-941-1000 outside of the US

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IRS info about au pairs:

http://www.irs.gov/businesses/small/international/article/0,id=96420,00.html

If you have any questions, please consult directly with the resources listed above so that  you can receive definitive answers regarding your specific situation. Agencies are not licensed to provide official tax advice, so we cannot provide host families or au pairs tax advice regarding program fee and wage inquiries. Tax laws vary from state to state, so we encourage host families and au pairs to consult with  a local professional tax advisor or directly with the Internal Revenue Service for any specific questions regarding taxation.

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