Is it legal to run payroll for your parent as household employer in order for them to become eligible for subsidies under obamacare?

Forum|Forum|7 years ago
June 1, 2019
5 replies
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My mom recently became a green card holder and we live in the state of NJ where there is a 5 year wait period for green card holders to be eligible for medicaid. I am considering running payroll for her as an household employer in order for her to be eligible for subsidies under obamacare. Is this legal to do so?

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Best answer by TaxGuyBill

The direct answer to your question is "Yes", if she does legitimate work for her pay (in other words, you can't pay her $14,000 a year if she only works a few hours a week).

HOWEVER, you may not need to do that. There is a provision that aliens that are not eligible for Medicaid still qualify for the Premium Tax Credit if their income is lower than the usual threshold. The 'catch' of that is that one of the other rules is that she can't qualify as your dependent on your tax return. If her income is over $4050, that would disqualify her from being a dependent.

Here is the legal gibberish describing the situation that aliens who don't qualify for Medicaid still qualify for the Premium Tax Credit (assuming they meet the other qualifications):

(5) Individuals lawfully present. If a taxpayer's household income is less than 100 percent of the Federal poverty line for the taxpayer's family size and the taxpayer or a member of the taxpayer's family is an alien lawfully present in the United States, the taxpayer is treated as an applicable taxpayer if -

(i) The lawfully present taxpayer or family member is not eligible for the Medicaid program; and

(ii) The taxpayer would be an applicable taxpayer if the taxpayer's household income for the taxable year was between 100 and 400 percent of the Federal poverty line for the taxpayer's family size.

https://www.law.cornell.edu/cfr/text/26/1.36B-2#b

S

SweetieJean

Employee

What Household Employees duties would she perform? Does she live with you?

S

SweetieJean

Employee

<a rel="nofollow" target="_blank" href="https://www.healthcare.gov/immigrants/lawfully-present-immigrants/">https://www.healthcare.gov/immigrants/lawfully-present-immigrants/</a>

R

r0jkumarAuthor

Employee

She lives with me and performs all the house chores like cooking and cleaning. I cannot add her to my health insurance plan since parents are not eligible under my plan.

T

TaxGuyBillAnswer

Employee

The direct answer to your question is "Yes", if she does legitimate work for her pay (in other words, you can't pay her $14,000 a year if she only works a few hours a week).

HOWEVER, you may not need to do that. There is a provision that aliens that are not eligible for Medicaid still qualify for the Premium Tax Credit if their income is lower than the usual threshold. The 'catch' of that is that one of the other rules is that she can't qualify as your dependent on your tax return. If her income is over $4050, that would disqualify her from being a dependent.

Here is the legal gibberish describing the situation that aliens who don't qualify for Medicaid still qualify for the Premium Tax Credit (assuming they meet the other qualifications):

(5) Individuals lawfully present. If a taxpayer's household income is less than 100 percent of the Federal poverty line for the taxpayer's family size and the taxpayer or a member of the taxpayer's family is an alien lawfully present in the United States, the taxpayer is treated as an applicable taxpayer if -

(i) The lawfully present taxpayer or family member is not eligible for the Medicaid program; and

(ii) The taxpayer would be an applicable taxpayer if the taxpayer's household income for the taxable year was between 100 and 400 percent of the Federal poverty line for the taxpayer's family size.

https://www.law.cornell.edu/cfr/text/26/1.36B-2#b

R

r0jkumarAuthor

Employee

Sorry. The legal language isn't quite clear to me. The way i understand this is that if her income is too low( like 10k per year), then she is not eligible for subsidies under obamacare in NJ. If i claim her as a dependent on my tax return , then my income gets attached to hers and then again she is not eligible for any subsidies under obamacare and i will have to bear the full cost of insurance which is around 700-800$ in NJ the last time i checked.I don't care about claiming her as a dependent on my tax return as long as she can get decent insurance that doesn't cost a crazy amount.