Lucho Posted March 20, 2011 Report Share Posted March 20, 2011 My clients mother quitted her job at my client request so she (mom) can take care of her new born baby (daughters baby). My client wants to hire her mom and pay all employment taxes required by law so her mom can continue contributing to her FICA and Medicare, other way mom could loose the few credits that she already has throughout a 5 or 6 years of employment. My client does not want anybody else to take care of her baby but Grandmother only. My client makes enough money to pay all expenses including a salary for her mother. My concern on this approach is: The relationship (parent), also mother will be living in the same house. For all of you experienced in this matter, what advice would you share with me for the benefit of my client? I am heading to church right now and promise to pray for this forum. Thank you Lucho Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 20, 2011 Report Share Posted March 20, 2011 Read publication 926 and your client would need to report payroll taxes on form 1040 Sch-H. Quote Link to comment Share on other sites More sharing options...
Lucho Posted March 20, 2011 Author Report Share Posted March 20, 2011 Read publication 926 and your client would need to report payroll taxes on form 1040 Sch-H. I will read the Pub. Thank you, OldJack. Lucho Quote Link to comment Share on other sites More sharing options...
jainen Posted March 23, 2011 Report Share Posted March 23, 2011 >> mom can continue contributing to her FICA << She can either take care of the baby or pay into FICA, but not both. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 23, 2011 Report Share Posted March 23, 2011 >> mom can continue contributing to her FICA << She can either take care of the baby or pay into FICA, but not both. so are you saying she can't hire her mom because they live in the same houeshold. I thought that was only for other children not being able to do child care credit Quote Link to comment Share on other sites More sharing options...
jainen Posted March 23, 2011 Report Share Posted March 23, 2011 >>she can't hire her mom << She can certainly hire her mother to take care of the baby in her own home. However, such family employment is not covered by Social Security unless she is a widow or unmarried divorcee, or has a disabled spouse. Quote Link to comment Share on other sites More sharing options...
michaelmars Posted March 23, 2011 Report Share Posted March 23, 2011 which makes no sense, the regs say you must pay fica if you are poor divorse, widow or have a disabled spouse, but if you are married and without these problems you can avoid paying fica. Our tax code is nuts! i learned this today about an hour before this thread Quote Link to comment Share on other sites More sharing options...
jainen Posted March 23, 2011 Report Share Posted March 23, 2011 >>Our tax code is nuts!<< This is not in the tax code. It dates back to 1968, when there was still a Congressman or two with a brain. It was just after Medicare started and our parents realized they could get the government to pick up support obligations for THEIR parents--just pretend to pay Mom enough to qualify for Social Security without reaching the income tax brackets! The loophole was quickly closed, except for single parents who had a legitimate need for grandma to help. By 1988 our generation was trying several variations of the same thing, and got the rule that we can't earn Social Security credits within the family unless there is a bona fide business. The earlier exception was retained. Quote Link to comment Share on other sites More sharing options...
ljwalters Posted March 23, 2011 Report Share Posted March 23, 2011 Does this mean if the child pays say $100 per week for parent to provide child care after school for the grandchild The adult child can not claim these payments for childcare credit? I did not know this. If the child care is provided at the grandparent home is it a different story. Linda and buddy Quote Link to comment Share on other sites More sharing options...
jainen Posted March 23, 2011 Report Share Posted March 23, 2011 >> payments for childcare credit << The original post was about the employee's Social Security taxes. My response comes from page 5 of Pub 926, which OldJack cited. The employer's Child and Dependent Care Credit is an entirely different matter. The rules for that are in Pub 503. Quote Link to comment Share on other sites More sharing options...
ljwalters Posted March 23, 2011 Report Share Posted March 23, 2011 I read pub 503 and found nothing about not being able to pay a parent for child care. SOOO. Why can this Grandmother not be allowed to accept payment for carring for the baby. File her own tax return using SCH C. Not arguing just asking. Linda and buddy Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 23, 2011 Report Share Posted March 23, 2011 She could do that, but that was not the question. The question dealt with paying her a salary as household help. And as the mother lives in the daughter's house, treating her as self-employed could run into problems for the daughter. It's really not worth it, IMHO, to try to beat the tax laws over a few quarters of SS earnings. Why not just pay her, and let Mom put the money into an IRA? Quote Link to comment Share on other sites More sharing options...
jainen Posted March 23, 2011 Report Share Posted March 23, 2011 >>Why can this Grandmother not be allowed to accept payment for carring for the baby<< As I said previously, she can certainly be hired for the job. She can be paid, and report the income accordingly. (As described it would be W-2 wages, not self-employment.) However, such family employment is not subject to Social Security taxes and does not generate Social Security credits. I am emphasizing that fact because FICA was one of the main goals of the plan. Quote Link to comment Share on other sites More sharing options...
michaelmars Posted March 24, 2011 Report Share Posted March 24, 2011 Of course since we can assume that daughter has a married name and mom has a different last name, who's to know that they are related anyway? @<@ hmm [looking over shoulder] who said that? Quote Link to comment Share on other sites More sharing options...
jainen Posted March 24, 2011 Report Share Posted March 24, 2011 >>try to beat the tax laws over a few quarters of SS earnings<< Take another look, kc. Note the insistance that the ONLY person for this job is her mother who just happens to be a few quarters short of full retirement benefits with lifetime medical care. They only have to pay $5000 a year to buy those quarters, and can claim a 20% tax credit for those payments. Isn't that exactly what the law was changed to prevent, 42 years ago? But why not double or triple the pay? Do you think a bit of math could come up with no tax liability, and grandma claiming maximum EIC and refundable child tax credit in addition to the retirement benefits? Of course, that would be for housework, not childcare, but then maybe there's another kid who grandma could hire for the 2441. Of course she will want to return all the money as "shared expenses," except for funding the teenager's Roth. Quote Link to comment Share on other sites More sharing options...
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