TheRealTomRose

I just finished doing my 2018 Au Pair taxes. Here is a list of everything I had to look up to get the job done.

Does my Au Pair have to pay taxes in 2019? (For the 2018 tax year)

Yes. They will almost certainly have to pay something, regardless of when they started work. (This is a change over tax years 2017 and earlier.)

Have 2018 Au Pair taxes gone up?

Yes. The amount of money Au Pairs have to pay in taxes has gone up dramatically. In my personal case, they went up 290% from $124 paid for the 2017 tax year to $483 paid for the 2018 tax year.

Is this change related to the Trump tax act?

Yes. I believe so. Here’s a quote from the WYSE Travel Confederation. “Prior to the 2017 Tax Cuts and Jobs Act, non-resident aliens, such as those working temporarily in the US under the Exchange Visitor Program, could earn up to $4,050 without paying tax. However, as of January 2018 (and up to 2025) the personal tax exemption was reduced from $4,050 to $0.”

Are you sure?

Yes, I’m positive. Regardless of the debate over how or why this has changed, it has definitely changed, and the rules and the guidelines are crystal clear. They are covered succinctly, clearly, and directly on the very first page of the 1040NR-EZ form instructions, and it is also indicated that this is a change. Quotes from the forms are included below.

Isn’t there a personal exemption that reduces the amount of tax owed?

Unfortunately, not. In 2017, there was a personal exemption. Here is a quote from the 2017 instructions from form 1040nr-ez:

Your personal exemption amount is $4,050.

However, in 2018, the instructions for form 1040nr-ez now read:

Personal exemption for individuals suspended. For 2018, you cannot claim a personal exemption.

Unfortunately, this is quite clear. The personal exemption for non-resident aliens has been suspended, dramatically increasing the amount of taxes that Au Pairs now owe each year.

For example, my last Au Pair owed $124 on her 2017 taxes (started work in July), but my current Au Pair owes $483 on her 2018 taxes (started work in July). This is an increase of 290%

What is the deadline to file 2018 Au Pair taxes?

The deadline to file taxes for the 2018 calendar year is April 15th, 2019

Can I count income I paid my Au Pair under the Child and Dependent Care Tax Credit

“As long as the host family has used an au pair’s child care services in order to work or look for employment, the stipend paid to the au pair, the costs of room and board and the fees paid to [the Au Pair service provider] are all eligible under the Child and Dependent Care Tax Credit.” Ref: EurAuPair

Can I use money from my Flex Spending Account (FSA) to pay Au Pair expenses?

Yes, but you can not count the same funds in both this AND the Child and Dependent Care Tax Credit. Also, you’ll need a statement of benefits, and the EIN of the provider. This is not sent automatically, so you’ll need to write to your Au Pair service provider and as them specifically for these documents.

Should I do my Au Pair’s taxes for her?

Suggestion: be a good host parent and help your Au Pair complete her taxes. It took me three hours to research and write this article, and I’m a native English speaking, tax-paying veteran who also teaches personal finance classes. Completing this form without help isn’t reasonable.

I suggest you do this together and share in the suffering. It’ll be much faster. Plus, the amount owed will likely be a big shock, so your host parent counseling services will be needed.

What tool should my Au Pair use to complete her taxes?

Go directly to IRS.gov and fill out the forms directly online, then print and mail them. Here is the link to the form you need.

Don’t use TurboTax. Recording miscellaneous income requires TurboTax Deluxe, which, as of this writing, costs $49. In this case, TurboTax also takes MUCH longer. Just use the straight form. It’s not as scary as you think.

What form should my Au Pair file?

Your Au Pair should probably be filing form 1040NR-EZ.

You may be able to use Form 1040NR-EZ if your only income from U.S. sources is wages, salaries, tips, refunds of state and local income taxes, scholarship or fellowship grants, and nontaxable interest or dividends.

About how much will my Au Pair owe in tax?

Now that there’s no personal exemption, this has become pretty simple to figure out. With no adjustments to make, you just take the total amount you paid her in the previous year and look it up at the bottom of the instructions, and it’ll tell you straight out. Here are some examples pulled directly from the instructions:

Income: $1,000, Tax owed: $101
Income: $4,000, Tax owed: $403
Income: $7,000, Tax owed: $703
Income $10,179, Tax owed: $1,031
Income: $10,400, Tax owed: $1,061

Where should I mail my completed 1040NR-EZ?

If you are enclosing a payment, send it here:

Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
U.S.A.

If you are not enclosing a payment, send it here:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
U.S.A.

How should I pay my tax?

If your Au Pair has personal checks, she can simply send one along with her completed 1040NR-EZ. If your Au Pair doesn’t use checks (like ours never do) then she can pay by credit card using one of the IRS recommended payment processors. Note. These processors charge a fee, and I consider the price (~$3) to be reasonable.

Are host parents required to withhold income for tax purposes for their Au Pairs?

No. Host Parents are not required to withhold income, nor make payroll payments to the IRS, nor are required to generate and give a W-2 to their Au Pairs. However, if both the Au Pair and the host family agree, all of the above can be done. If you already have a home business or family office, I think it’s a great service to run your Au Pair through the traditional payroll process. That way, they won’t owe hardly any tax at tax time. This probably isn’t worth it, however, if you don’t already have the mechanisms set up to do this.

Are host parents required to file a schedule H for their Au Pairs?

Generally no. Only if the au pair is a resident alien 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.

Is my Au Pair a “resident alien” or “non-resident alien” for tax purposes?

Au Pairs are almost always “non-resident aliens”. There are two tests for residency. (1) The “green card test” I.e. Do you have a green card? Answer: probably not. There is also (2) the “substantial presence test.” Have you spent more than 183 [non-exempt] days in the United States in the past three years? Answer: probably not, because generally, time spent here under a J1 visa is considered exempt time. Most Au Pairs are here under a J1 visa (e.g. “student”) Okay, so, for tax purposes your Au Pair is a “non-resident alien”

What income counts as income for my Au Pair?

“A nonresident alien usually is subject to U.S. income tax only on U.S. source income. Meaning, even if your Au Pair has substantial wealth in their home country and is earning money somehow (from investments, perhaps), those earnings don’t count.

Does the stipend I pay my Au Pair count as income?

Yes. “All wages and any other compensation for services performed in the United States are considered to be from sources in the United States.” They are therefore subject to tax.

Is Au Pair income “connected with a trade”?

Non-resident alien income is taxed differently depending on whether or not it is “connected with a trade” The IRS answers this the following way: “If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States” So, yes, Au Pair income is considered to be “connected with a trade.”

How do I know for sure that my Au Pair should be filing for 1040NR-EZ?

There is a long checklist of things that must be true (and are almost always certainly true for the vast majority of Au Pairs.

UPDATE: 4/26/2016: I discovered after the fact, that my provisional ballot was not counted, and was illegally discarded without sufficient cause. 

I just voted early in NC without an ID. Here are all the things I was surprised by.

You can vote early.

If you can vote early, why would you vote on any other day? As far as I can tell, there is no downside to voting early, unless you want to wait in long lines. If you’re planning to vote, vote early. Why doesn’t every state do this? It’s a no-brainer. It’s cheaper, easier, faster, less-stressful, etc. The only reason I can think of to not allow early voting is to cut down on phantom cost, or to tip the scales unfairly toward one party or another. Since it’s harder for many people to vote on one particular day, early voting makes voting more representative.

You can vote without an ID, but it’s really difficult.

I was told by a whole bunch of people that you can not vote in NC without an ID. This is not true. If you want a human-readable summary of the rules because you’re planning to vote without an ID, I recommend NCVoter.org

If you are unaffiliated with a party, you can vote in either primary.

To vote without ID, you have to know that you can use a “provisional ballot”.

While at the voting center, I was told twice by two different people that I could not vote because I didn’t have an ID. When I asked whether I could submit a provisional ballot (just as good as a real ballot) they said yes and sent me somewhere special to fill out the provisional ballot paperwork. I can imagine most people being discouraged at one of the first two rejections and not continuing on. I was armed the knowledge that voting without an ID is allowed, so I was able to make it through. The attendants tried really hard to serve me nicely, but despite their best efforts, I felt like I was doing something wrong the entire time.

Provisional ballots *are* counted on voting day.

Parking was easy, and lines were short.

Voting should be done online

If you don’t see your ballot go into the machine, then it probably doesn’t count.

I have finally figured out a way to create an easy to setup backup plan for RSA keys.

Here’s the short version: use the service Boxcryptor to create an encrypted directory on your dropbox account. Put your RSA keys in there, then create a symlink to an automatically searched .ssh directory in your terminal path. (If you’ve never done this before, it’ll take about an hour. Once you know what you’re doing, it takes about 5 minutes.)

Here’s a longer version:

So, why does this matter? In 2004, my laptop was stolen. (My own stupidity was involved because I left it unattended in the airport for a little longer than desired. The term stolen, therefore, is a little dramatic, but never the less, all my data was lost.) I had been traveling for 6-months in an internet-poor area, so I lost 6 FULL MONTHS OF DATA. Ouch. I actually cried.

Since then, I have been on a personal quest to keep my data in a constant state of fault-tolerance. My goal: be able to drop my laptop in a lake without losing anything.

Today, some of this is easy: (1) Get a dropbox account (or Box or Drive). (2) Create a virtual drive on your machine. (3) Keep everything in there that you possibly can.

That system takes care of 90% of your data-loss woes. But there is a problem: what about things that are too sensitive to store on Dropbox? Dropbox is only as secure as the fickle internet will allow, afterall.

Until today, I’ve been relying on manually copying that information onto a physical backup drive. (Translation: that’s what I tell myself when I know the actual answer is that I’ve basically been not backing that stuff up.)

Today, I discovered Boxcryptor. An amazing service. Here’s how it works: (1) Boxcryptor sets up a virtual drive on your local machine that is protected by AES-256 and RSA encryption algorithms, (2) you store anything sensitive in that drive (financials, login credentials, secret plots, etc.), (3) Boxcryptor encrypts the data, and stores the encrypted data on your dropbox cloud, where it is backed up and shared with your other machines.

Voila! You’re covered.

Boxcryptor was a ..little.. difficult to setup because I didn’t understand their mental model of how folders are encrypted. You have to access your files through the boxcryptor virtual drive that it creates, not via your usual dropbox directory. Knowing that, the process is pretty straightforward. This is actually a really helpful reminder for knowing when you’re operating encrypted, and when you aren’t.

The rest of this is just my personal way of making this setup easier to use. It’s optional, but makes the change transparent when working with RSA keys on the terminal (which I do all the time.)

Now, for authentication credentials, it takes a little bit more hacking to get this to work seamlessly. For example, when you log into something using the terminal, your boxcryptor encrypted drive is probably not in you path for ssh public keys. There are two fixes for this:

(1) Add your Boxcryptor virtual drive to your public key search path. (I don’t like this because I don’t like dirty search paths)

(2) Create a symbolic link from your Boxcryptor virtual drive to your usual public key storage location. (This is what I did)

Here’s how I did that. Disclaimer: If you can’t understand this code, you probably don’t want to be using this.

Go to the right place:

> cd ~

Make a backup incase you screw up 

> cp -r .ssh .sshbak

Move your keys into your new encrypted drive 

> mv .ssh /Volumes/Boxcryptor/Dropbox/Encrypted/ssh

Create a symbolic link so that you can still reference your keys from their old location 

> ln -s /Volumes/Boxcryptor/Dropbox/Encrypted/ssh/ ~/.ssh

 Now, you can access your keys like they were in their old home: 

> ssh -i ~/.ssh/superkey.pem ubuntu@ec2-54-198-256-097.compute-1.amazonaws.com

I am my memories. They define me. The make me who I am.

When I hunt back over my memories, they wash over me. They come quickly in jerks and jitters. My mind skips from one to the next.

Sometimes, I pause and linger over a single experience. Something punctuated by an intense physical moment.

The pain of a needle in my ear. The quick escalation of pain that plateaus. I find relief not because the pain has stopped, but because it is not getting worse and I am strong enough to bear it.

I feel powerful because my best friend sees that I am strong. So strong that I can tell him to stop holding back and push harder.

We laugh. It’s the absurdity of the situation that catches us in the light. What are we doing? It seemed like a reasonable idea at the time, but we realize now how little we thought things through.

It’s just a pierced ear. Practically everyone has one. But not everyone has a memory to go along with it.

A bottle of vodka on the table. Both to sterilize the skin and also to calm the nerves. Did I need it? I don’t think so. He ships off to the army the next day and it’s not like I was going to stop halfway through.

The army is death. That’s practically it’s entire purpose. Bullets are their tradecraft. Blood is their output. Am I foolish to be afraid?

The trickle of blood that rolls down my earlobe is a tiny little piece of reality. We both ignore it as it falls on the floor. An insignificant detail.

The blood will wash free. It always does. I am alive. I have my pain, my friend, my memory.

Edit: Some have asked, so let me clarify that the friend I'm referring to in the story is Travis Sorensen, who is alive and well. This took place circa 2002.

In case you haven’t heard. Massachusetts has recently enacted the worst possible legislation I can think of for the local entrepreneurial community: a 6.25% tax on all intra-state revenue for software services. You heard that right, if you have an online business that traffics in data and has an office in Massachusetts, starting July 31st, 2013 you have to pay 6.25% on all revenue in the state. That comes right off the top line. Yikes! Your competitor in Silicon Valley can make the same product, sell to the same customer, and pay 0%.

The first time I read about this, I assumed that it was nonsense that wouldn’t affect me. Not true. At Testive we have already spent several hundred dollars talking to our attorney about this. It is real.

The impact on our business is enormous. It no longer makes sense for us to conduct business with any customers in Massacusetts because the 6.25% tax is too big of a cut on our profit margin. We can’t easily increase prices for one customer over another because we’re an online company and we don’t discriminate based on customer location. We probably will continue to take Massacusetts customers just to make things simple, but we may lose money on them, and we’ll likely stop advertising inside the state.

Is this the death blow for the Boston entrepreneurial ecosystem? Why would anyone in their right mind open a software services company in a state where their profit will be reduced by 6.25%, right off the bat? It doesn’t make any sense. I can’t in good conscience advise anyone to start new business here until this law is changed.

At a time when Boston is bleeding good entrepreneurs to Silicon Valley, the last thing we need is an entrepreneurship tax. The short-term revenue gained from this moronic tax will be crushed by the long-term affects of loss of commerce.

Hello! Online businesses can be built anywhere, you can’t tax them at the local level. That’s crazy.

Take action:

Look up your representative in the state legislature here and send them an email telling them how much of a disaster this is for the entrepreneurial eco system.

Read more:

Rosenthal: New tax threatens state software ecosystem

In Major Shift, Patrick Backs Tech Tax Repeal