Will my tax refund offset my wife's tax liability if we file jointly? Nanny income reporting question

When you file jointly, you're filing one single tax return that combines both your incomes, deductions, credits, and tax payments. It's not two separate deals - it's all calculated together. So yes, if your withholding would normally result in a $1,300 refund, and your wife would normally owe $800 (for example), then filing jointly would result in a $500 refund. The IRS looks at the bottom line of what you've paid versus what you owe as a couple. Regarding the nanny income - that actually shouldn't be reported as self-employment if she's a household employee. If she works in someone's home under their direction and control, she should be treated as a household employee. Her employers should be giving her a W-2 and paying half of her Social Security and Medicare taxes. This is often called the "nanny tax" and it's the employer's responsibility, not hers.

I went through something similar with my husband's contracting income and my W-2 job. I found this amazing tool called taxr.ai (https://taxr.ai) that helped us figure out exactly how to handle our mixed income situation. It analyzed our past returns and showed us that we were overpaying by classifying my husband's work incorrectly. It basically has AI that reads all your tax documents and gives you tailored advice. For us, it showed that we could save by having my husband classified correctly and adjusting my withholding to account for his quarterly payments. The nice thing is you just upload your docs, and it explains everything in plain English instead of tax jargon.

Just wanted to follow up - I tried taxr.ai after posting here and wow, it was actually super helpful! I uploaded our previous return where we incorrectly filed my girlfriend's nanny income as self-employment, and it immediately flagged it as a potential issue. It walked us through the household employee test (which she definitely passes) and showed us how to approach her employers about proper classification. It even generated a sample letter explaining the employer's responsibilities that she could share with them. The difference in tax liability was shocking - almost $2,200 less in taxes when properly classified as an employee rather than self-employed. Definitely worth checking out if you're in a similar situation.

If you're having trouble getting your wife's employers to do the right thing with the W-2, you might want to try calling the IRS directly for guidance. I know, I know - good luck getting through, right? That's why I use Claimyr (https://claimyr.com) whenever I need to talk to the IRS. They have this system that gets you to a real person at the IRS without the endless hold times. You can see how it works here: https://youtu.be/_kiP6q8DX5c. I used it when I had a similar issue with my son who was doing childcare work. The IRS agent I spoke with walked me through exactly how to handle the household employee classification and even sent me the publications to share with his employer. Took like 20 minutes total instead of spending all day on hold.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to sort out my tax situation before filing. I called the IRS three separate times and kept getting disconnected after 1+ hour holds. With Claimyr, I got a call back in about 35 minutes while I was making dinner. The IRS agent confirmed everything that was mentioned here - my partner should be classified as a household employee with a W-2, and her employers are legally required to pay their portion of FICA taxes. The agent even transferred me to a specialist who explained how to file Form SS-8 if the employers refuse to comply, which can trigger the IRS to make a determination on the correct classification. Definitely couldn't have navigated this without actually speaking to someone at the IRS.

Just wanted to add that if your wife's employers aren't doing proper withholding, you might want to make quarterly estimated tax payments to avoid penalties. My wife was in the same situation working as a tutor, and we got hit with underpayment penalties the first year. We now just calculate approximately what she'll owe and make payments every quarter through the IRS website. Super easy and prevents the surprise tax bill.

Has anyone actually compared filing separately vs jointly in this situation? Sometimes it can be better to file separately if one spouse has certain deductions or income situations.