With the year winding down, it’s time to think about preparing your 2017 nanny taxes. If you’ve been remitting taxes and tracking payroll throughout the year, then you have less to worry about. Or better yet, you’ve had a payroll service paying your employee and filing taxes for you.
However, if you’ve left everything to the last minute, here are the steps you (or your accountant) need to take when preparing your 2017 nanny taxes. Don’t delay as the deadline for providing a W-2 to your employee is January 31, 2018.
Do you owe nanny taxes?
If you paid cash wages of $2,000 or more in 2017 to any one household employee, then you need to pay Social Security and Medicare taxes, commonly referred to as “nanny taxes.” Do not count wages paid to your spouse, a child under the age of 21, parent, or any employee under the age of 18 at any point in 2017.
If you paid total cash wages of $1,000 or more in any calendar quarter of 2017 to your household employees, then you need to pay federal unemployment tax. You may also owe state unemployment tax. Do not count wages paid to your spouse, a child under the age of 21, or a parent.
Preparing your 2017 nanny taxes
If you owe taxes, here are the steps you need to take when preparing your nanny taxes:
- Confirm your employee’s legal name, Social Security number, and current address.
- Calculate the taxes withheld from your employee’s pay. If taxes haven’t been withheld and remitted during the year, then they will owe this amount when they file their return. For your employee, they pay Social Security (6.2 percent) and Medicare (1.45 percent) taxes. They will also owe federal income tax and state income tax (if applicable). Again, if these taxes weren’t withheld during the year based on their W-4, then your employee will owe the entire amount when they file their return.
- Calculate the taxes you owe as an employer. Include Social Security (6.2 percent), Medicare (1.45 percent), and Federal Unemployment Tax (six percent on the first $7,000 of gross wages). You may also owe state unemployment taxes. As with your employee’s tax responsibility, you will owe the entire amount when you file your taxes unless you made payments throughout the year.
- Complete Form W-2 (Wage and Tax Statement) and Form W-3 (Transmittal of Wage and Tax Statements).
- Provide your employee with their copy of Form W-2 on or before January 31, 2018.
- Send (or file electronically) Copy A of Form W-2 and Form W-3 to the Social Security Administration by January 31, 2018.
- Complete Schedule H.
- Complete Form 2441 (Child and Dependent Care Expenses).
- File Schedule H with your personal federal income tax return (Form 1040) by April 17, 2018.
- Keep your records in a safe place for at least seven years.
There is an easier way
You likely have better ways to use your time than spending it on preparing your nanny taxes (at least we hope so!). Let GTM Payroll Services manage your household payroll, prepare your nanny taxes, and keep you compliant with tax, wage, and labor laws. Get a free, no-obligation consultation with a household employment expert at (800) 929-9213. We’ll review your situation, answer your questions, and provide advice on the best way to handle your payroll, tax, and insurance obligations.