When employing a foreign Au Pair through an agency, what possible tax ramifications should be considered for the host family? What about social security payments?

ANSWER

The BIDaWIZ Team's Answer:

The hosting family likely has minimal, if any reporting requirements for a foreign Au Pair paid through an agency. Please note that Au Pair wages are not usually subject to Social Security and Medicare taxes because of their status as a J-1 non-immigrant nonresident alien. The hosting family is also exempt from paying federal unemployment taxes on the Au Pair's wages given that they are a nonresident alien. In addition, because the wages are paid for domestic service in a private home, they are not subject to mandatory federal income tax withholding. Even more, the agency may be withholding the Au Pair's taxes in preparation for filing a US tax return via form 1040-NR. The only situation in which the hosting family may need to withhold taxes is if the Au Pair had previously been in the US as a student, teacher, trainee, or researcher in F, J, M, or Q non-immigrant status. If this is the case, the Au Pair would be a resident alien during their current stay in the US. The host family would be liable to pay federal unemployment tax if the Au Pair's wages during any calendar quarter, or during the preceding calendar year, equaled or exceeded a certain dollar threshold amount. The host family would also use Schedule H of Form 1040 to report and pay over any FUTA liability which might arise from the Au Pair's wages. However, the agency may be doing this for the host family anyway if this is the case. We would recommend that you confirm this when you have an opportunity.