Paying my sister for childcare

Forum|Forum|6 years ago
June 1, 2019
1 reply
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We're going to hire my sister as a nanny for our kids. We want to be able to claim the childcare tax credit, so I'm assuming in order to do that we have to pay certain taxes, and she has to pay certain taxes...just like any other nanny. But I've seen several things that say you DON'T have to pay employment taxes if it's your immediate family. Do we have to pay and withhold employment taxes? Can we claim what we paid her for the childcare tax credit?

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Best answer by SweetieJean

You do not withhold or pay social security and Medicare taxes from wages you pay to:

Your spouse,
Your child who is under age 21,
Your parent, unless an exception is met, or
An employee who is under age 18 at any time during the year, unless performing household work is the employee's principal occupation. If the employee is a student, providing household work is not considered to be his or her principal occupation.

Since sister is not listed as an exception, you must withhold Soc Sec and Medicare.

https://www.irs.gov/taxtopics/tc756.html

SweetieJeanAnswer

Employee

You do not withhold or pay social security and Medicare taxes from wages you pay to:

Your spouse,
Your child who is under age 21,
Your parent, unless an exception is met, or
An employee who is under age 18 at any time during the year, unless performing household work is the employee's principal occupation. If the employee is a student, providing household work is not considered to be his or her principal occupation.

Since sister is not listed as an exception, you must withhold Soc Sec and Medicare.

https://www.irs.gov/taxtopics/tc756.html