I'm a CPA and I'm trying to help a good friend and her au pair with their tax returns and I just ran into an issue. The IRS guidance states that an au pair is not subject to FICA/Mcare tax and that a W-2 should not be filed to report wages paid (so they are NOT treated as a household employee as a nanny would be). However, the au pair is required to file a 1040-NR (assuming the au pair meets the classification of NR alien) to report the stipend (wages) they received if their wages exceed the NR alien exemption. So if I'm understanding this correctly, the au pair should obtain an SSN. The host family should claim the child care tax credit using the au pair's SSN. The au pair should file form 1040-NR to claim the income and pay the tax due. Here's where my question comes in - - If no W-2 is filed, won't the IRS issue a matching notice because the au pair's reported wages do not agree to a W-2 (b/c one wasn't filed)??? Or maybe they won't give a crap because non-resident aliens are not able to take tax credits?? I think you'd have to fill out the 1040-NR by hand too or over-ride in TurboTax because without a W2 TurboTax won't know what to do. Has anyone dealt with this situation?????
