Tax Considerations for Au Pairs
Broadly speaking, the French term “au pair” means “peer”. The term takes on a very narrow technical definition in United States law, however, and carries with it various tax obligations. An au pair is a visitor to the US admitted under a J1 visa as part of an exchange program run by the Bureau of Educational and Cultural Affairs, cannot stay more than a year, and is required to be between 18 - 26 years of age. Usually au pairs are students who desire the cultural and educational experiences provided by the program.
The au pairs are housed with families chosen as hosts by organizations sponsoring them, and are required to be provided with private sleeping arrangements, meals, two weeks of paid vacation, at least one weekend off every month, as much as $500 to be used toward higher education, as well as a stipend related to the minimum wage. In addition they must not work over 10 hours per day, nor over 45 hours each week. They perform a child care role, but are not required to do housekeeping. Finally, they must be enrolled for at least 6 credit hours at an educational institution (although they can merely audit classes if they want).
The United States Department of Labor has determined the stipend is essentially a wage since the relationship is one of employer-employee between them and the host family, so many of the requirements in Publication 926, Household Employer’s Tax Guide apply.
Medicare and Social Security Taxes
In most cases, wages paid to an au pair are not subject to Medicare and social security taxes since they are a J1 nonimmigrant and nonresident alien. But, if they were previously in the US under Q, M, J, or F status, they may be considered a resident alien, which could trigger the requirement for the employer (host family) to withhold Medicare and social security taxes. IRS Publication 926 provides more detail, including information on reporting withholding. If withholding is required, the au pair may need to obtain a social security number, and the employer an Employee Identification Number.
Withholding Income Tax
Wages paid to an au pair are considered gross income for the recipient, and they are obligated to file United States tax returns. However, withholding of income taxes is not required.
An au pair is likely to have a US tax obligation given the current minimum wage and typical number of hours worked. Therefore, the IRS recommends that au pairs do one of these two things:
- Use Form 1040ES-NR or 1040ES to make estimated tax payments throughout the year
- Work with the host family to agree to have them withhold income taxes from their wages. They must file a W4 with their host family, who will then withhold taxes and issue a W2. In this case, the au pair must have a social security number and their host family must have an Employer Identification Number.
As with Medicare and social security taxes, the nonresident alien status of the majority of au pairs means the host family is exempt from unemployment taxes. But again, if they were previously in the US under Q, M, J, or F status, they may be considered a resident alien - meaning their host family is liable for unemployment taxes as required by law. Details are in Publication 926.
Income Tax Return
The majority of au pairs will need to file an income tax return on Form 1040NR. As nonresident aliens, they cannot claim the Hope Credit, Earned Income Tax Credit, or Lifetime Learning Credit. Although they enroll in classes, their primary function is not that of a student, so they cannot use student provisions of any tax treaties