Au Pair Taxes – who, what, when, how, why?

April is “tax time”. The American tax year runs from January 01 until December 31 (unlike the Australian tax year that runs 1 July through to 30 June).

Disclaimer: This is just a math calculation and does not actually qualify as actual advice for anyone at anytime or for any reason. I am not an accountant of a financial advisor or any of those things. I am not qualified to give tax advice. I have just done my own research and reading into this, and this is the information I have found, the calculations I have done, and the conclusions I have come to about these issues, because I am a math geek! If you have an questions, please contact an accountant or financial advisor.

Some of your reading this might not have even known or realised that you are supposed to file a tax return. It is something that au pair agencies have really only made known over the last few years – before that, everyone was just told to talk to their financial advisor or accountant – but it isn’t a new thing. And it makes sense. If you live in the US for a year, and earn money, you should have to file a tax return.

First things first – you need to have a social security number to file taxes in the US. If you don’t have one, you can’t file. I have no idea what happens if you don’t file your taxes – but my guess is that is may very likely have an effect on whether or not you will be granted another USA or a greencard in the future – so, as a word of warning for those who think ‘oh well, how are they going to know if I don’t file my taxes’, if you EVER plan on coming back to the US – as a repeat Au Pair, on a vacation or even possibly to live, think long and hard before not paying your taxes.

The IRS has an information page about au pair taxes here.

The main thing that influences how much tax you have to pay, are when you arrived in the United States, and if you are a first year au pair, or an extension au pair.

The basics of it, are that as a Non-Resident Alien, you are required to pay tax on your stipend, minus an  exemption, which for the 2011 tax year (the one that we are filling in paperwork for now) is $3700. In the 2012 tax year (ie. when you file NEXT April, for the part of your year that goes into 2012) the IRS has announced that it will be $3800.

So, that means, most likely* if you arrived to the Training School before August 20th, 2011, you will owe some sort of tax. If you arrived after August 20th, then you still need to file a tax return, but you shouldn’t owe anything. (*I am doing this all around the fact that you are paid $195.75 stipend per week – if you receive an increased stipend for whatever reason, you will need to do your own calculations.)

There are a couple of things you need to do, and I am going to try and provide all the forms/links you need to help you.

Firstly (the last step) you need to post your 1040NR-EZ form to the following address:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215

You also need to enclose a check for the tax you owe with your form. This needs to be done before April 17, 2012 otherwise you will also be charged a late-fee and interest.

Below I have taken a screen-shot of the exact directions on how to make the check out to the IRS. You can also see this on the bottom of page 8 on this form.

 

The form that you need to fill out  can be found on the IRS website here. You can either fill in the form on your computer and then print it, or you can print it out and fill it by hand.

The long-winded instructions for filling out the form can be found here. This document also has the tax table that you will need to calculate how much you owe.

The Cultural Care sample form and information can be found in InfoSource here. You will need to login to your Cultural Care account to access this. It shows a completed tax form, however beware that it is a previous years form, and the exemption amount is incorrect for the 2011 tax year. This form is helpful for you to know which parts of the form you need to put data into, and which you just put a ‘0’ in.

1. Calculate how many weeks you received the stipend in 2011. So, if you arrived on August 8th to the training school, your first stipend would be the week ending 19th August (I’m using the Friday for this example) and in 2011 you would have received 20 stipend payments of $195.75, which is a total income of $3915.00 in the 2011 financial year.
2. Subtract the exemption ($3700) from the amount you earned, to find out your  taxable income. In the case of someone who arrived in August 8, 2011, this amount is $215.
3. Use the tax table in this form starting on page 17 to find the amount of tax you have to pay. For example, for the August 8 au pair, it would fall into the ‘at least 200 but less than 225’ category, with a tax burden of $21.
4. Part of the form also requires you to tell them how many days you have been in the US in 2011, as well as 2010 and 2009. There is a handle tool here that lets you put in your arrival date, and then if you put January 1, 2012 in the end date, it will tell you how many days you were here in 2011. If you have left the US during your year at any point, you also need to write these dates down in the boxes provided, and then subtract the FULL days you were out of the US from the total number of days (ie. if you went to Canada for a weekend and left the US on Friday and returned on Sunday, you would only count 1 days, the Saturday, as being out of the US, as you were in the US on both the Friday and the Sunday at some point).

This may serve as a little warning to au pairs who are planning on coming to the US. You will need to pay taxes, and the earlier or later in the year your departure is, the more taxes you will have to pay.

What I would tell you to do, especially if you arrive after April and before August (as you will have to pay tax DURING your au pair year, as opposed to after you return home), is to put away some of your stipend each week to save so that you have money to pay your taxes.

• A January arrival au pair will pay an average of $600 in taxes, with the full amount due all in one tax year (ie. if your au pair year is January ’12 to January ’13, you will owe $600 in April of 2013).
• A March arrival au pair will pay an average of $400, with the full amount due in one tax year.
• A June arrival au pair will pay an average of $270, with half due in each tax year (ie. if your au pair year is June ’12 to June ’13, you will owe approximately $135 in April 2013, and $135 in April 2014.)
• An August arrival au pair will pay an average of $270 also, but will have only about $40 due in the first tax year, and $230 due in the second tax year (ie. if your au pair year is August ’12 to August ’13, you will owe approximately $40 in April 2013, and $230 in April 2014.)
• An October arrival au pair will pay an average of $400, the same as a March arrival au pair, but this amount will be due in the second tax year (ie. if your au pair year is October ’12 to October ’13, you will owe the full amount in April 2014.)
• A December arrival au pair with pay an average of $600 in taxes, the same as a January arrival au pair, but this amount will be due in the second tax year (ie. if your au pair year is December ’12 to December ’13, you will owe the full amount in April 2014.)

Also, if you are planning on extending for a second year, you will have to pay taxes in your second year as well, and they will be pretty much a full years taxes (around $600-700) if you extend for 9-12 months, so take that into account.

I have provided some examples below of arrival dates, and estimated taxes for first year au pairs to give you an idea of what you might owe, or what you could owe if you haven’t started your year yet!

I hope this has been helpful, and feel free to comment with any questions you have and I will try to answer them the best I can!

 

Arrival January 2011
Stipend payment weeks – 46-51
Wage earned in 2011 – $9005 – 9983
Estimated tax owed – $533 – $628

Arrival February 2011
Stipend payment weeks – 42-45
Wage earned in 2011 – $8209 – $8809
Estimated tax owed – $453 – $513

Arrival March 2011
Stipend payment weeks 37-41
Wage earned in 2011 – $7243 – $8026
Estimate tax owed – $353 – $433

Arrival April 2011
Stipend payment weeks 32 – 36
Wage earned in 2011 – $6264 – $7047
Estimated tax owed – $256 – $333

Arrival May 2011
Stipend payment weeks 28 – 31
Wage earned in 2011 – $5481 – $6068
Estimated tax owed – $178 – $236

Arrival June 2011
Stipend payment weeks – 25-27
Wage earned in 2011 – $4894 – $5268
Estimated tax owed – $119 – $159

Arrival in July 2011
Stipend payment weeks 22-24
Wage earned in 2011 – $4307 – $4698
Estimated tax owed – $61 – $100

Arrival August 1, 2011
Stipend payment weeks – 21
Wage earned in 2011 – $4111
Tax owed – $41

Arrival August 8, 2011
Stiped payment weeks – 20
Wage earned in 2011 – $3915
Tax owed – $21

Arrival August 15, 2011
Stipend payment weeks – 19
Wage earned in 2011 – $3720
Tax owed – $2 (lol)

Arrival August 22 – December 31, 2011
Stiped payment weeks  1-18
Tax owed – NONE (but you still need to file the paperwork).

Just to reitterate, I am doing this all around the fact that you are paid $195.75 stipend per week – if you receive an increased stipend for whatever reason, you will need to do your own calculations.

I am not an accountant of a financial advisor or any of those things. I am not qualified to give tax advice. I have just done my own research and reading into this, and this is the information I have found, the calculations I have done, and the conclusions I have come to about these issues, because I am a math geek! If you have an questions, please contact an accountant or financial advisor.