Is an Au Pair Considered a Household Employee for Tax Purposes?

Families who host an au pair often wonder about their tax responsibilities, particularly whether the au pair is considered a household employee. This classification affects tax withholding, Social Security and Medicare contributions, and other reporting obligations. Misunderstanding these rules can lead to unexpected liabilities or noncompliance with IRS regulations.

To determine how taxes apply to an au pair, it’s essential to examine employment classification, required withholdings, and recordkeeping duties.

Household Employee Status Under Tax Regulations

The IRS defines a household employee as someone who works in a private home and is subject to the employer’s control over how tasks are performed. This classification applies to nannies, housekeepers, and other domestic workers. However, au pairs are treated differently due to the structure of their program.

Au pairs come to the U.S. under the J-1 Exchange Visitor Program, overseen by the U.S. Department of State. Because they participate in a cultural exchange rather than traditional employment, they are classified as nonresident aliens for tax purposes. This distinction exempts them from certain payroll tax obligations.

Unlike household employees, au pairs are not subject to Social Security and Medicare taxes under Section 3121(b)(19) of the Internal Revenue Code. Their stipends are taxable income but are not subject to FICA taxes. Additionally, families do not need to file a W-2 or pay federal unemployment taxes on their behalf.

Criteria for Employment Classification

Determining whether an au pair qualifies as a household employee depends on the nature of their work, financial compensation, and level of independence. The IRS assesses factors such as control over work schedules, job expectations, and payment structure. However, au pairs fall into a unique category due to the terms of the J-1 Exchange Visitor Program.

A key factor in employment classification is the degree of control an employer has over how tasks are performed. Traditional household employees, such as nannies, follow a structured work schedule dictated by the family. In contrast, au pairs operate under program regulations that set limits on their duties, working hours, and compensation. The Department of State enforces these conditions, ensuring au pairs provide childcare while also engaging in cultural exchange activities.

Compensation further differentiates au pairs from household employees. Instead of receiving a salary or hourly wage, au pairs are given a weekly stipend. This amount is influenced by federal minimum wage requirements under the Fair Labor Standards Act (FLSA), but because room and board are included, their earnings do not always align with traditional wages. This structure reinforces their classification as program participants rather than employees under IRS guidelines.

Withholding Obligations

Families hosting an au pair may assume they must withhold federal income taxes from the weekly stipend, but the IRS does not require automatic withholding for nonresident aliens under the J-1 visa program. Instead, au pairs are responsible for managing their own federal tax obligations. However, if an au pair requests voluntary withholding, the family can withhold taxes and provide a Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, for reporting purposes.

Since au pairs do not qualify for the standard deduction available to U.S. citizens and resident aliens, their taxable income begins at the first dollar earned. This often results in a higher percentage of income being subject to tax compared to domestic workers who can claim deductions. Families should ensure au pairs understand their tax responsibilities, including the need to file Form 1040-NR, U.S. Nonresident Alien Income Tax Return, by the annual tax deadline, typically April 15 unless an extension is granted.

Social Security and Medicare Considerations

Since au pairs are classified as nonresident aliens under the J-1 visa program, they are exempt from Social Security and Medicare taxes. Section 3121(b)(19) of the Internal Revenue Code specifically excludes nonresident aliens on J-1 visas from FICA tax obligations. As a result, host families are not responsible for withholding or matching these taxes, unlike in cases where they employ a nanny or other domestic worker.

Because au pairs do not contribute to Social Security, they do not earn credits toward future benefits. In contrast, U.S. citizens and resident aliens contribute 6.2% of wages to Social Security and 1.45% to Medicare, with an additional employer match. If an au pair later obtains a different visa status or permanent residency, they may need to consider how their prior earnings, or lack of contributions, affect future benefit eligibility.

Federal Unemployment Taxes

Since au pairs do not meet the IRS definition of a household employee, they are also exempt from Federal Unemployment Tax Act (FUTA) obligations. FUTA applies to employers who pay $1,000 or more in wages to a household worker in a calendar quarter, requiring them to pay a 6% tax on the first $7,000 of wages per employee. However, because au pairs receive a stipend rather than a traditional wage, host families are not required to pay this tax.

This exemption means families do not need to file Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. Additionally, because au pairs are not covered under state unemployment insurance programs, they are ineligible for unemployment benefits after their program ends. Families hiring a nanny or other domestic worker instead of an au pair should be aware that FUTA tax obligations would apply.

Required Recordkeeping

Although host families are not required to withhold payroll taxes or report au pair earnings on a W-2, maintaining accurate financial records is important. Keeping records of stipend payments, including dates and amounts, helps ensure compliance with IRS regulations and assists au pairs in filing their tax returns.

Au pairs must file Form 1040-NR to report their taxable income, and having a clear record of their earnings simplifies this process. Families should also retain copies of any correspondence related to tax matters, such as written agreements on voluntary withholding. If an au pair requests a Form 1042-S, families should ensure it accurately reflects the total stipend paid. While these steps are not legally required for host families, they help prevent disputes and ensure both parties fulfill their tax responsibilities.