Parents as household workers

Standard

It has been a month and I am still too lazy to write anything :(. So, on one of my boring days as usual, I just think of this topic as I cannot find a clear information on websites out there.

Here is my situation. I want to hire my dad as a household worker so that he can have enough social security credits (40 credits). However, IRS does not allow us to do that. I even call the IRS and confirm with them. There are exceptions that can be found under publication 926 on the IRS website (or you can order the publication to be sent via mail):

Wages not counted.  Do not count wages you pay to any of the following individuals as social security and Medicare wages, even if these wages are $1,700 or more during the year.

  1. Your spouse.
  2. Your child who is under the age of 21.
  3. Your parent. Exception: Count these wages if both the following conditions apply.
    1. Your parent cares for your child who is either of the following.
      1. Under the age of 18, or
      2. Has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter.
    2. Your marital status is one of the following.
      1. You are divorced and have not remarried,
      2. You are a widow or widower, or
      3. You are living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in a calendar quarter.
  4. An employee who is under the age of 18 at any time during the year. Exception: Count these wages if providing household services is the employee’s principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.

If your situation is not under the exception, you will not be able to provide social security and Medicare wages for your family members. They can claim themselves as self-employed if they want to file income tax and earn social security credits. However, if you have your own business, it is a different story. You can hire your spouse, your parents, your children and other family members.

It is kind of early to talk about tax at this moment, but I think it is better to prepare ahead of time :).

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