What taxes do I need to pay for my Nanny, House Manager, Housekeeper, Butler or Personal Assistant? Where can I find help to figure out the taxes I need to withhold and file?
*Charlotte’s Best Nanny only provides information on filling taxes, and is not the employer of any nannies. Tax obligations are solely the families and nannies responsibility. We ask you to consult the IRS, or a Certified Public Accountant before making any tax decisions. We are not responsible for any families or nannies not abiding by State and Federal tax laws.*
You are required to pay taxes on every employee you have, including anyone working in your home. The Internal Revenue Service (IRS) requires you to file payroll tax filings for any worker in your home making more than $1800 wages in a calendar year. These taxes are referred to as “Nanny Payroll Taxes”. Employer’s obligations for nanny payroll taxes include:
- State and Federal Taxes: You must pay any state and federal taxes that apply
- Social Security & Medicare Taxes: both you and your nanny pay a tax rate of 6.2% for Social Security and 1.45% for Medicare. So deduct 7.65% from your nanny’s pay, and you’ll have to also pay 7.65% of your own money.
- State Unemployment Tax (FUTA) and disability insurance taxes are levied on the employer. The FUTA tax amounts to 0.6% of FUTA wages. “FUTA wages” are capped at the first $7,000 of your nanny’s cash wages during the year. The FUTA tax comes from your own funds. No withholding allowed.
Are there any exceptions?
There are a few exceptions, which the IRS outlines in Publication 926. Most cover your family members, including your children under the age of 21.
To report your nanny’s wages and those federal unemployment taxes, you’ll need the following tax forms:
- Form SS-4: Fill out Form SS-4 or apply online through the IRS to obtain your Employee Identification Number (EIN) – which you’ll need for tax forms.
- Form W-2: Fill out Form W-2 if you pay Social Security and Medicare wages of $1,800 or more, and give Copies B, C and 2 to your nanny. Copy A (along with Form W-3) goes to the Social Security Administration.
- Schedule H: If you pay your nanny cash wages of $1,800 or more file Schedule H.
- Form I-9: Have your nanny complete this form when hired and be sure she shows you her Social Security card and Drivers License.
- Form 1040: When you file your federal tax return, attach Schedule H to Form 1040. Pay by April 15.
Tax Breaks and Credits
Your family can take advantage of certain tax breaks, such as tax credits and flex spending accounts. Many families can reduce their tax liability by $250 to 1,2000 per year through tax credits and flex spending accounts.
- Pre-tax Flexible Spending Accounts: Some companies provide these accounts where their employees can put pretax money in a flex spending account to pay for childcare. Check with your Human Resources department to determine your eligibility for such account.
- The Child and Dependent Care Tax Credit: This credit can provide you with up to 20% of your child care costs in the form of a tax credit. To receive this credit, you must include Form W-10 and Form 2441 with your annual federal tax return.
Where can I find help to figure out the taxes I need to withhold and file?
If you are like many of us, trying to figure out all of this is difficult and can be confusing. Don’t worry though, that’s why we have accountants and pay roll companies. Both can help you navigate taxes in different ways:
- Your Accountant: Knows the tax code and laws that pertain to where you live. Your accountant would be the person that knows how to file your taxes properly, and what tax credits and breaks you can take advantage of.
- Pay Roll Company: Pay Roll Companies will help you figure out what to take out of your employees pay checks. They will help calculate exactly what you should be paying your employee. They will also provide you with statements that will help your accountant file your taxes, and figure out what your obligation is. And on top of all of that your pay roll company will ensure that your employee is paid weekly, so you do not have to worry about transferring money, or writing a check.
Pay Roll Companies
Below is a list of pay roll companies we recommend. Please visit their websites to get more details on the services they provide.
- Paychex Pay Roll Service: https://online.paychex.com
- GTM Pay Roll Service: http://www.gtmpayroll.com/household/
- Direct Pay Roll: http://www.directpaypayroll.com