We specialize in bookkeeping, payroll, income tax return preparation, and retirement planning, and serve a nationwide clientele consisting of individuals and businesses of all types and sizes (LLC, partnerships, C & S Corporations), as well as trusts and estates. As financial problem solvers, we provide practical advice and proactive solutions with personalized service. We are affordable, experienced, and friendly, and we tirelessly study and research the ever-changing world of tax law and regulation so that we can help every client realize the greatest possible savings and return on investments. Our office is conveniently located in Dover, Delaware. Please contact us today to find out more about how we can make YOUR life less taxing!Tax
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๐ช๐ต๐ฎ๐ ๐ต๐ฎ๐ฝ๐ฝ๐ฒ๐ป๐ ๐ถ๐ณ ๐บ๐ ๐ฐ๐ต๐ถ๐น๐ฑ'๐ ๐ผ๐๐ต๐ฒ๐ฟ ๐ฝ๐ฎ๐ฟ๐ฒ๐ป๐ ๐ฎ๐ป๐ฑ ๐ ๐ฏ๐ผ๐๐ต ๐ฐ๐น๐ฎ๐ถ๐บ ๐ผ๐๐ฟ ๐ฐ๐ต๐ถ๐น๐ฑ ๐ผ๐ป ๐ผ๐๐ฟ ๐๐ฎ๐
๐ฒ๐?
The IRS gives the default claim to the custodial parent, who is the parent the child lives with for at least 183 nights during the year.
When both parents claim the same child, the situation unfolds in three main stages:
1. The first return gets accepted by the e-file system, while the second return gets rejected because the child's Social Security number is already marked as used.
2. The second parent must mail in a signed paper return to force an IRS review, triggering Notice CP87A where both parents must submit residency proof like school or medical records.
3. The IRS awards the claim based on night counts or higher income if custody is an exact 50/50 split, forcing the non-qualifying parent to pay back credits with interest and penalties.
A practical way to protect yourself is to keep third-party residency records on file if you are the custodial parent, or secure a signed IRS Form 8332 from the custodial parent before filing if you are the noncustodial parent.
๐๐ด ๐ต๐ฉ๐ฆ 183-๐ฏ๐ช๐จ๐ฉ๐ต ๐ณ๐ถ๐ญ๐ฆ ๐ด๐ฐ๐ฎ๐ฆ๐ต๐ฉ๐ช๐ฏ๐จ ๐บ๐ฐ๐ถ ๐ฉ๐ข๐ท๐ฆ ๐ฆ๐ท๐ฆ๐ณ ๐ฉ๐ข๐ฅ ๐ต๐ฐ ๐ค๐ข๐ญ๐ค๐ถ๐ญ๐ข๐ต๐ฆ ๐ง๐ฐ๐ณ ๐บ๐ฐ๐ถ๐ณ ๐ฐ๐ธ๐ฏ ๐ง๐ข๐ฎ๐ช๐ญ๐บ?
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๐๐ฎ๐ป ๐ ๐ฝ๐ฎ๐ ๐บ๐ ๐ป๐ฎ๐ป๐ป๐ ๐ฎ๐ ๐ฎ๐ป ๐ถ๐ป๐ฑ๐ฒ๐ฝ๐ฒ๐ป๐ฑ๐ฒ๐ป๐ ๐ฐ๐ผ๐ป๐๐ฟ๐ฎ๐ฐ๐๐ผ๐ฟ?
In most cases, no. The IRS considers nannies household employees because you control how and when they perform their work in your home.
Trying to issue a 1099 or pay under the table opens you up to IRS tax evasion penalties, liability for unpaid employment taxes, and state labor law violations.
Here is how you should set up your nanny pay:
โข Both you and your nanny contribute 7.65% for Social Security and Medicare taxes once you cross the annual earnings threshold.
โข You pay federal unemployment tax on the first $7,000 of wages if you pay $1,000 or more in any calendar quarter.
โข You need to get an Employer Identification Number, issue a W-2 by January 31, and report household taxes using Schedule H on your tax return.
If hiring a nanny allows you and your spouse to work, you can take advantage of the Child and Dependent Care Credit to offset some of those care costs.
๐๐ฐ๐ณ ๐ข๐ฏ๐บ๐ฐ๐ฏ๐ฆ ๐ธ๐ฉ๐ฐ'๐ด ๐ฉ๐ช๐ณ๐ฆ๐ฅ ๐ช๐ฏ-๐ฉ๐ฐ๐ฎ๐ฆ ๐ฉ๐ฆ๐ญ๐ฑ, ๐ธ๐ฉ๐ข๐ต ๐ธ๐ข๐ด ๐ต๐ฉ๐ฆ ๐ต๐ณ๐ช๐ค๐ฌ๐ช๐ฆ๐ด๐ต ๐ฑ๐ข๐ณ๐ต ๐ข๐ฃ๐ฐ๐ถ๐ต ๐ด๐ฆ๐ต๐ต๐ช๐ฏ๐จ ๐ถ๐ฑ ๐ต๐ฉ๐ฆ๐ช๐ณ ๐ฑ๐ข๐บ?
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๐๐ผ๐ ๐ฑ๐ผ ๐ ๐๐ฒ๐ ๐๐ฝ ๐บ๐ ๐ฝ๐ฎ๐๐ฟ๐ผ๐น๐น ๐๐๐๐๐ฒ๐บ ๐ณ๐ผ๐ฟ ๐ง๐ฟ๐๐บ๐ฝ ๐๐ฐ๐ฐ๐ผ๐๐ป๐ ๐ฐ๐ผ๐ป๐๐ฟ๐ถ๐ฏ๐๐๐ถ๐ผ๐ป๐?
When adding employer contributions to a child's account, your payroll software needs specific mapping to process and track transactions accurately.
Here are the core steps:
โข Set up your system for employer-paid contributions only, keeping paycheck deferrals off the table for now.
โข Label transactions as a Section 128 Employer Contribution when routing funds to the child's account trustee.
โข Map total annual contributions directly to Box 12 on Form W-2 using Code TA.
โข Give participating employees a written statement by January 31 showing total contributions made to their dependents' accounts during the previous calendar year.
Comment SETUP below, and we can help you check your payroll mapping before rolling out new benefits.
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First State CPAs & Associates |
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|
18 S. State St, Dover, DE 19901 |
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| (302) 736-6657 | |
| Business Hours | |
| January 1st January 31st | |
| MondayโFriday: | 8amโ5pm |
| Saturday & Sunday: | closed |
| February 1st April 15th | |
| MondayโThursday: | 8amโ6pm |
| Friday: | 8amโ5pm |
| Saturday: | By appointment |
| Sunday: | closed |
| April 16th December 31st | |
| MondayโThursday: | 8amโ5pm |
| Friday, Saturday & Sunday: | closed |