My mother works for me as a babysitter; I'm issuing her a W2 so that she can show some income and reconcile her PTC. I looked into the whole employee vs contractor thing and she is really an employee. The W2 shows no tax withheld (my understanding is that her wages are not subject to social security or federal unemployment taxes). My question is: what, if anything, do I report under state and local wages?===========>>>> you don't need to withhold / pay social security and Medicare taxes from wages you pay to your parent, your mother. But, your mother will still report this income if she is required to file taxes for the year of 2018. You do not have to issue her a W-2 at the end of the year if you decide not to withhold FICA taxes, but it is a good idea to officially have her on the payroll. Then, your mother is required to report this income and pay FICA as well as income taxes if you claim the Child and Dependent Care Credit. What I mean is that If you plan on claiming the Child and Dependent Care Credit, then you must supply the Social Security information of your child care provider , your mother, to the IRS. Because you are claiming this credit, you are no longer exempt from the nanny tax, and your mother will be responsible for reporting her income as well as paying her portion of FICA taxes.
I have a federal EIN but no state EIN; we're in Michigan. Her earnings for 2018 were $4,500.===================>>>>>>>>> since you issue a W-2 then you will need a fed/state EIN. You should contact your state unemployment tax agency to find out whether you need to pay state unemployment tax for your household employee.
alsoYou need to contact your home state of MI dept of revenue for more info in detail on your state ID # .