This will provide a summary of the state income tax that you withheld from your caregiver.ĭoes Filing Your Nanny Tax Involve a Lot of Work?Īccording to the estimates released by the IRS, an average family may have to spend about 50 to 55 hours a year to accurately manage their nanny tax process so the answer is yes. You may have a state requirement to fill out the Annual Reconciliation Form. You will be required to prepare a Schedule H, which you can file along with your federal tax return.ĭ. This will inform the SSA that you have correctly withheld a FICA tax from your nanny and remitted your own FICA tax throughout the year.Ĭ. You will have to fulfill the SSA requirements by filing Form W-2 Copy A and Form W-3. Each year by the end of January, you will have to provide your caregiver with a Form W-2, which they can use to file their tax return.ī. Fill out Your Tax Forms at the Year-EndĪ. You will need to send to the IRS your 1040 estimated payments four times a year.Ĥ. (In some states, the filing requirement may be annual or monthly). You will be required to file your state tax returns usually on a quarterly basis. Once you have it, you can use it to get your state ID number from the relevant tax agency.įor each pay period, you will have to correctly compute the gross pay of your nanny, the amount of tax withheld from them, and the corresponding employer taxes. You can obtain your FEIN (federal employer ID number) from the IRS. To report nanny taxes, you will require both state and federal tax ID numbers. Here is a concise summary of what you need to do:ġ. An employment history and income that is verifiable when they want to obtain a home mortgage or an auto loan.Unemployment benefit (provided they lose the job without their fault).Medicare coverage and social security income on retirement.Secondly, it will be easier for them to qualify for benefits such as: And in fact, there are significant benefits to paying “above the table”:Ī family (the employer) could be eligible for a tax break and will certainly have fewer worries if the IRS audits their accounts.Ī nanny (the caregiver) would also gain the same peace of mind. Here is a quick primer that will provide you with the basics, and demonstrate “paying by the rules” is really not that difficult to learn or do, particularly if you use NannyPay to help you. For over twenty years, NannyPay has been helping new household employers understand and comply with the Nanny Tax Laws – and save money too!
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With setup fees and other costs, a payroll service could cost you more than $1,000 in the first year alone.īut with just a little bit of initial effort, you can learn how to do it yourself, and NannyPay software is here to help. Nanny payroll services may seem an attractive option at first – until you consider the overall cost. So when they first hire a household caregiver or nanny, fulfilling the tax requirements of the IRS can seem at first a bit overwhelming.
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