Tax Considerations When Hiring A Nanny

Tax Considerations When Hiring A Nanny



Tax Considerations when Hiring a​ Nanny
To satisfy the​ IRS and remain a​ happy law abiding citizen,​ you'll need to​ assume the​ role of​ employer and pay employment taxes (Social Security,​ Medicare,​ etc.),​ report payroll withholdings (taxes,​ insurance benefits and the​ like) and of​ course,​ make sure that she is​ legally able to​ work in​ the​ United States.
Here are a​ list of​ quick steps to​ get started:
Obtain state and federal EIN (Employer Identification Numbers)
You can obtain a​ federal EIN instantly on-line or​ you​ can download the​ SS-4 form and mail it,​ or​ call the​ IRS .​
To obtain your state EIN,​ you'll need to​ contact your state government.
Verify Work Eligibility
To verify U.S .​
work eligibility,​ you​ will need to​ complete an​ I-9 form and follow the​ U.S .​
Citizenship and Immigration Office's procedures.
Setup Payroll and Withholding Tracking
You must track the​ amounts that you​ pay your nanny and the​ amounts that you​ withhold from her pay .​
You are not required to​ withhold federal income tax,​ however your nanny is​ required to​ pay federal taxes based on​ her income .​
You may choose to​ withhold though to​ save your nanny time and possible IRS fines for tax underpayment .​
If you​ choose to​ withhold,​ you​ will need your nanny to​ complete a​ W-4 form that you​ must keep in​ your records .​
You will use the​ information provided on​ the​ W-4 to​ calculate the​ federal withholding amounts .​
Periodically (usually at​ the​ end of​ each quarter) you​ must pay to​ the​ IRS the​ amounts you've withheld and also file a​ form 1040ES .​
If you​ pay your nanny more than $1500 (for tax year 2018),​ you​ are required to​ pay social security and Medicare tax .​
The amount you​ are required to​ pay is​ roughly 15.3% of​ her gross wages .​
You may pay the​ full amount yourself,​ or​ you​ may deduct 50% of​ the​ amount from your nanny's wages .​
You'll pay these taxes on​ a​ quarterly basis and at​ the​ end of​ the​ year,​ you'll file a​ Schedule H to​ report the​ amounts .​
End of​ Year Reporting
At the​ end of​ each year,​ you​ will need to​ report the​ wages you've paid and any withholding amounts .​
In most instances,​ you​ will file a​ Schedule H along with your regular 1040 tax return.
You will need to​ provide your nanny with a​ W-2 form detailing her gross wages and all withholdings and deductions for the​ year .​
You must provide your nanny with her W-2 by January 31st and you'll need to​ report the​ wage information to​ the​ IRS by February 28th using a​ form W-3 .​
Alternatives
If you'd rather spend time enjoying your free time and let someone else manage your tax payment and filing requirements,​ there are numerous companies that provide the​ service to​ nanny employers,​ such as​ PayCycle and Breedlove Associates.
Disclaimer
We're not tax professionals and this information is​ provided to​ help you​ perform your own due diligence and research related to​ hiring a​ nanny .​
As with all tax matters,​ we recommend that you​ consult with a​ professional tax advisor or​ Certified Public Accountant.




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