It’s tax season again. After 3 years of hosting an Au Pair, my first Au Pair had to pay income tax this year. How is this the case? Well, both of my Au Pairs arrived in September. Neither Au Pair earned enough in 3 months in order to meet the standard deduction to owe income taxes in 2012 or 2013. My second Au Pair renewed her tenure with us for another 9 months. She received stipends from us for the entire 2014 year, earning more than the minimum. It seems to me that many Au Pairs are not aware of the amount that they will owe the US federal government until it is time to file. While the standard deduction and taxable earnings table might change slightly from one year to the next, APs can determine an estimate of their income tax well before the current tax season documents are available. Current tax season documents become available mid-late January here.
As an example, an Au Pair calculated she received stipends for 42 weeks during Jan. 1st and December 31st in a given year. Her stipend is $195.75.
$195.75 x 42 weeks = $8,221.25.
To figure out the amount she owes, she subtracts the standard deduction of 3,950 (2014 standard deduction).
$8,221.25-$3,950 = $4,271.5 (Don’t freak out just yet!)
$4,271.5 is her taxable income, not the amount she owes the federal government.
Based on the table beginning on page 23 in the 2014 1040NR-EZ filing instructions, the amount she owes =$428.
Sounds like a lot? It’s slightly less than 6% of her gross income $8,221.25. In most other countries (Europe especially), the income tax is much higher.
What about State taxes? Every state has different rules for minimums/standard deductions. In Virginia, if you earn less than $11,950 in a calendar year, you DO NOT need to file Virginia State Tax. This is probably true for most Au Pairs in a given calendar year (unless an Au Pair earns more than the minimum weekly stipend).
In the United States it is law to file a tax return every calendar year. If you choose not to file taxes it could prevent you from obtaining a visa in the future. If you are planning to apply for a U.S. visa in the future, you may be required to pay any unpaid taxes plus penalty and interest charges. Your social security number that you received is permanent. You will not receive a new one no matter what life change (marriage) or visa you apply for in the US. I do not recommend evading your taxes. Instead, I recommend budgeting in advance by being aware of the dollar amount that you will owe or not owe based on the number of stipends you received from Jan 1st to December 31st. Set aside a percentage of this amount with each paycheck. No one wants to be surprised with owing $623.00.