Do au pairs have to pay nanny taxes?
The short answer is while Federal and state payroll taxes – Social Security, Medicare, and Unemployment Tax – do not apply to au pairs, state and federal employment laws DO. This means that au pair compensation needs to adhere to the greater of the Federal, state or locality minimum wage, and that overtime, when required, must be paid. Additionally au pairs are required to pay any income taxes due. Because of the applicability of wage and hour laws, detailed pay stubs are highly recommended.
The term ‘au pair’ refers to a foreign exchange student admitted to the United States under a student exchange program administered by the US Department of State. An au pair is admitted into the United States with a J-1 visa, and is generally not allowed to remain in the United States longer than 12-24 months. Au Pairs are usually students who participate in the program seeking the program’s stated educational and cultural experiences.
An au pair lives with their host family and is provided room and board, an educational stipend, and two weeks paid vacation. The host family pays them a weekly stipend, an amount determined by the program, and the au pair may not work more than 10 hours in a day, no more than 45 hours in a week, and must have two consecutive days per week off. Au pairs are not expected to perform general housekeeping tasks, but are expected to perform child-care functions.
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 his host family. An au pair nanny salary is not usually subject to Social Security and Medicare taxes because of the au pair’s status as a J-1 non immigrant and as a nonresident alien. Likewise, au pair nanny salary is not subject to FUTA and state unemployment taxes. Au pairs are subject to income taxation on their au pair stipend. At the current prevailing stipend rate of $195.75* per week, it is likely that the au pair will have an income tax liability on her U.S. individual income tax return because nonresident aliens are not able to claim the Standard Deduction or Stimulus Plan Credits. The au pair, a nonresident alien, will be required to file Form 1040NR or Form 1040NR-EZ to report her au pair wages. The $195.75 per week au pair stipend is based on the $7.25 2009 US minimum hourly wage, subject to adjustment when this number increases. Recent class action litigation resulted in a settlement agreement that stipulates that the greater of the Federal, state or locality minimum wage must be used in the calculation of the au pair stipend. In California, for example, where the state minimum wage in 2020 is $12/hour the minimum au pair stipend is $324 weekly.
There are very rare circumstances when an au pair is considered a resident alien and subject to Social Security and Medicare taxes. If this is the case, the host family is subject to all of the same tax and reporting obligations of a nanny employer.
Au Pair Stipends Tied to Minimum Wage
The Federal minimum hourly rate is $7.25 as of July 2009. Au pair minimum hourly compensation varies between $7.25 – $15.00 per hour depending on locality.
The au pair stipend is calculated as the applicable minimum wage multiplied by 45 hours per week less a 40% credit for room and board. it is important to note that the greater of the Federal, state or locality minimum wage must be used in these calculations. The minimum au pair stipend is $195.75 per week effective 7/24/2009 for a standard au pair based on Federal minimum wage. Many states and cities have greater minimum hourly wages and when applicable these must be paid. Au pairs may negotiate for a greater wage with the prospective host family. Some au pair programs offer unique types of au pairs (elite au pairs) and set different stipends (~$250 per week). You should contact your au pair local coordinator for details.
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