In this week’s post, I explain the basics of au pair taxation.
A reader recently asked if au pairs have to pay taxes while they are in the United States. The au pair program allows young people from throughout the world the opportunity to come to the United States. Au pairs stay with a host family and receive room/board, a stipend, and a cultural experience in exchange for assisting their host family with childcare.
The American cultural experience would not be complete without…taxes.
Au pairs are subject to federal and state income taxes
In most circumstances, au pairs are considered nonresident aliens and must pay taxes on their U.S. income. If an au pair had already been living in the U.S., prior to being part of the program, they may be considered a resident, but this is less common. This post will discuss taxation for au pairs who are nonresident aliens.
As nonresidents, au pairs are subject to federal and state income taxes on their stipend income. The federal return form for nonresident aliens is the 1040-NR.
If the au pair lives in a state with income taxes (not all states have them), they may be subject to state income taxes as well. The rules vary by state.
A host family can set up income tax withholdings from the weekly stipend. However, if this is not the case, an au pair can make quarterly estimated tax payments. If no taxes are withheld and estimated payments are not made, the au pair may owe an underpayment penalty and interest when their return is filed.
Can au pairs claim deductions and credits?
Typically, nonresident aliens cannot claim the standard deduction. However, itemized deductions can be claimed if they are related to the U.S. income. For example, donations to U.S. charities and state taxes paid can be deducted. Many credits also do not apply to nonresident aliens.
For more information about the difference between a deduction and a credit, see our recent post, Basic Income Tax Formula.
Other things to consider
Here are several other things to keep in mind:
Before filing, the au pair will need a social security number or individual taxpayer identification number.
Form 8843 is also required to be filed. This form is required to prevent the time the au pair has been in the United State from counting toward the "substantial presence test." If someone meets the substantial presence test, they are considered a U.S. resident and must pay taxes on all of their worldwide income.
Au pairs typically do not have to pay Social Security and Medicare taxes.
Example
Becky comes to the U.S. to be an au pair. Her host family lives in Virginia. She starts her work as an au pair halfway through the year. Her weekly stipend is $220/week, which she receives for 26 weeks in 2022. Her total U.S. income for the year is $5,720 (220 * 26 = 5,720). Becky’s host family did not withhold any income taxes from her stipends. Because Becky is a nonresident alien, she cannot claim the standard deduction. However, she does claim a deduction for $400 she donated to the church she has been attending in Virginia. Becky’s taxable income is $5,320 (5,720 – 400 = 5,320). She will owe $532 (5,320 * 10% = 532) of federal income taxes. She is also subject to Virginia state income taxes, but because her income is below the filing threshold in Virginia, she does not have to file (the filing threshold in Virginia is $11,950 for single filing status). Becky does not have to pay Social Security or Medicare taxes.
If you have any comments, questions, or ideas for future posts, please let me know
I hope you found this post helpful and educational. If you have any comments, questions, or ideas for future posts, please let me know. You can reach me directly via email at crawford@ulmerfinancial.com.
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