W2 no SS or Medicare taxes withheld

[Terry53029]

Client has a W2 from an agency. She qualifies  to exclude income under Notice 2014-7. Agency did not withhold any SS or Medicare tax. They should have withheld, but since it is an out of state agency I doubt my client could get it corrected' Ultimately my client will be responsible for 1/2 of taxes. I am thinking on the W2 worksheet to mark the box to pay unemployment taxes on W2 income only, and file that way. Any thoughts ?

[TaxGuyBill · Accepted solution]

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@Terry53029 wrote:

 Agency did not withhold any SS or Medicare tax. They should have withheld,

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Are you SURE about that?  Social Security and Medicare taxes are NOT always required.

Although the "agency" may have issued her a W-2, in some cases the employer is considered the person receiving the services.  If that is the case, the person is a Household Employee, and in some cases a Household Employee is NOT subject to Social Security and Medicare taxes (such as if it is your spouse).

Q12: https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income

https://www.irs.gov/publications/p926#en_US_2020_publink100086740

[Skylane]

Follow the W2

[shf1957]

A lot of colleges do that, mainly with students doing work study and it is fine.... just follow and enter the w2.  Do not make them pay the social security or medicare.  

[Just-Lisa-Now-]

I see them like this all the time.

[Terry53029]

@TaxGuyBill Thanks for the input bill, the client cares for her disabled son. Do you think that makes any difference as to who is receiving the services

[Just-Lisa-Now-]

I think that may be right, its when its a child I dont see the SS and Mdcr boxes filled in.

[Terry53029]

Thanks for all your input, Will just follow the W2. Just was thinking none of earnings will go into her retirement, and that seems like a bad thing.

[qbteachmt]

Here's a follow up topic to 2014-7: https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income

[sjrcpa]

was thinking none of earnings will go into her retirement, and that seems like a bad thing.

Can she make an IRA contribution based on these earnings? I don't know if this counts since it is not taxable. I rarely see these.