Au pairs

The term Au pair is a French phrase meaning "at par" or "at peer level" and it traditionally refers to a person who temporarily lives with a host family. In the United States (U.S.), however, the term has come to have a more specific meaning: It describes a category of Exchange Visitors who come to the U.S. under a program administered by the Department of State Bureau of Educational and Cultural Affairs (ECA). An au pair is always admitted into the U.S. on a J-1 visa, may not remain in the U.S. for more than one year, and must be between the ages of 18 and 26.

Au pairs stay with host families chosen by sponsoring organizations. they receive a private bedroom, meals, a full weekend off each month, two weeks paid vacation, up to $500 for taking class at universities or colleges. and a cash stipend based on the U.S. minimum wage. Au pairs may not work more than 10 hours a day and may not work more than 45 hours per week. They are expected to perform child-care, but not to do general housekeeping. They must enroll in at least 6 semester hours of course work at a post-secondary schools,; but they may choose to audit the class may audit the classes for no credit if they wish.

U.S. tax residency

Most individuals with J-1 Au Pair visa status are treated as nonresident aliens (NRAs) for U.S. tax purposes because their days of presence in the U.S. generally do not count toward Substantial Presence Test to determine residence. If, however, the au pair had previously been in the U.S. in F, J, M, or Q status as a student, teacher, trainee or researcher, they might be a resident alien during their current stay in the U.S.

Federal income tax

In 1994, the U.S. Department of Labor determined that the au pair stipend constitutes "wages" because an employer-employee relationship exists between the au pair and their host family.

For tax purposes, Au Pair wages are essentially in the nature of household employment, even though they are in the United States on a J-1 Cultural Exchange Visa. Refer to Publication 926, Household Employer's Tax Guide.

Social Security and Medicare taxes

Au pair wages are usually no subject to social security and Medicare taxes (FICA) because au pairs are typically nonresident aliens due to their J-1 status. Au pair who become a U.S. resident during their current stay in the U.S., might be subject to social security and Medicare taxes if their annual au pair wages exceed the applicable dollar threshold found in Publication 926. Please refer to Alien Liability for Social Security and Medicare Tax.

If the au pair is a U.S. resident and their annual au pair wages exceed the applicable dollar threshold, then the host family must withhold social security and Medicare taxes and report them on Schedule H, Household Employment Taxes, of Form 1040, U.S. Individual Income Tax Return, and on Form W-2, Wage and Tax Statement. The host family will need to apply for an Employer Identification Number (EIN) if it is required to withhold tax and file Form W-2. The au pair will need to apply for a U.S. Social Security number.

Federal income tax withholding

Since au pair wages are paid for domestic service in a private home, they are not subject to mandatory U.S. income tax withholding and reporting on Forms 941, Employer’s Quarterly Federal Tax Return, and W-2. However, au pair wages are includible in the gross income of the recipients, and au pairs are required to file U.S. individual income tax returns.

At the current wage rate, it is likely that the au pair will have an income tax liability on their U.S. individual income tax return because nonresidents (with certain exceptions) are not able to claim the Standard Deduction. For this reason, it is recommended that the au pair take one of the following two steps:

1. File and pay U.S. estimated income tax payments during the year on Form 1040-ES (NR) PDF if the au pair is a nonresident, or on Form 1040-ES if the au pair is a resident, or
2. If both the au pair and the host family agree, file Form W-4, Employee’s Withholding Certificate, with their host family, indicating on a written statement that the au pair voluntarily wishes a withholding amount of U.S. federal income tax deducted from their weekly au pair wages. The host family will report and pay over this withheld federal income tax on Schedule H of Form 1040. The host family will also issue Form W-2 to the au pair to report their au pair wages and income tax withholding. The host family will need to apply for an Employer Identification Number (EIN) if it decides to withhold tax and file Form W-2. The au pair will need to apply for a U.S. Social Security number.

Federal unemployment taxes (FUTA)

Most au pairs are nonresidents of the U.S., and therefore their host families would be exempt from paying federal unemployment taxes on their au pair wages. However, if an au pair is a resident of the U.S., the host family would be liable to pay federal unemployment tax if the au pair's wages during any calendar quarter, or during the preceding calendar year, equaled or exceeded a certain dollar threshold amount. This certain dollar threshold amount, and the annual maximum amount of wages subject to FUTA tax, may be found under Federal Unemployment Tax in Publication 926, Household Employer's Tax Guide.

The host family would also use Schedule H of Form 1040 to report and pay over any FUTA liability which might arise from the au pair's wages.

Federal income tax filing

Most au pairs are nonresidents of the U.S., and therefore will be required to file Form 1040-NR, U.S. Nonresident Alien Income Tax Return, to report their au pair wages. They are not eligible for the Earned Income Tax Credit (EITC), the American Opportunities Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). An au pair is not really a "student “or “trainee” in the United States. Therefore, au pairs are not eligible to claim treaty benefits related to their au pair wages from gross income under the student/trainee article of any U.S. income tax treaty.