{"id":11783,"date":"2017-01-16T16:49:58","date_gmt":"2017-01-16T21:49:58","guid":{"rendered":"https:\/\/gtm.com\/household\/?page_id=11783"},"modified":"2020-05-01T14:51:19","modified_gmt":"2020-05-01T18:51:19","slug":"nanny-taxes-qa","status":"publish","type":"page","link":"https:\/\/gtm.com\/household\/nanny-taxes-qa\/","title":{"rendered":"Nanny Taxes Q&A"},"content":{"rendered":"

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Nanny Taxes Q&A<\/h1>\n

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Answers to Your Nanny Tax Questions<\/h3>\n

Starting on your nanny taxes and have no idea where to begin? You\u2019re not alone and we\u2019re here to help. Here are answers to some of the most common questions household employers have about their nanny taxes.<\/p>\n

1. What is the nanny tax?<\/h4>\n

The nanny tax refers to the employment taxes paid when a family or individual hires someone to work in their home. This is typically a nanny who looks after children but also includes in-home elder care workers, housekeepers, household managers, butlers, and drivers. Household employees and their employers pay Social Security and Medicare taxes on the worker\u2019s wages. Employees also pay federal and state (if applicable) income taxes. Employers pay federal and state unemployment taxes. Essentially, for tax purposes, household employees are treated the same as traditional employees.<\/p>\n

2. Do I need to pay taxes on my household employee?<\/h4>\n

If you paid cash wages of $2,100 (2018) to any one household employee, then you have a tax responsibility.<\/p>\n

You also owe federal unemployment tax (FUTA) if you paid total cash wages of $1,000 or more in any calendar quarter to a household employee.<\/p>\n

This does not apply if your household employee was your spouse, child under age 21, parent, or any employee under the age of 18 at any time in the current tax year.<\/p>\n

3. Can I file nanny taxes on my own?<\/h4>\n

The IRS estimates that it takes a household employer 60 hours each year to comply with all federal and state tax laws. It can get complicated and time-consuming. You\u2019ll need to adhere to all applicable federal and state tax, labor, and wage laws like the Fair Labor Standards Act and Domestic Workers Bill of Rights. Some household employers rely on their accountant or a firm like GTM Payroll Services to handle payroll processing and tax filings.<\/p>\n

Before handling nanny taxes and payroll on your own, we suggest you download The Complete Guide to Household Payroll<\/a>. This guide will help you every step of the way and explain what you need to do and why. There\u2019s even a handy checklist and payroll calendar at the end of the guide to use as references.<\/p>\n

However you proceed, it\u2019s important to do to it the right way. There can be steep financial consequences if you fail to properly pay your nanny taxes.<\/p>\n

4. My nanny is not a U.S. citizen. Do I still need to pay nanny taxes?<\/h4>\n

For tax purposes, you\u2019ll treat a noncitizen who is your employee the same as if they were a citizen. However, only noncitizens authorized to work in the U.S. by the Department of Homeland Security can get a Social Security number and be eligible for employment.<\/p>\n

5. I\u2019ve paid my nanny cash throughout the year. How do I file nanny taxes?<\/h4>\n

First, it\u2019s illegal to pay your nanny in cash or check without documentation of pay rate, hours worked, taxes withheld, and more provided to your employee on payday.<\/p>\n

Hopefully, you\u2019ve kept track of your nanny\u2019s wages for the year. If you have their gross wages, you can begin to calculate<\/a> what you and your employee owe in taxes. Time is of the essence as Form W-2 must be provided to your employee and the Social Security Administration by January 31. You and your employee should be prepared to take on a hefty tax bill as well. Since you haven\u2019t been withholding taxes during the year, the entire tax amount is due by April 15.<\/p>\n

Make it a point to follow federal and state tax, wage, and labor laws when it comes to paying your nanny. Withhold taxes from each paycheck and remit quarterly.<\/p>\n

6. Does my household employee receive a 1099 or W-2?<\/h4>\n

Nannies, housekeepers, in-home elder care providers, and other domestic workers are considered employees and not independent contractors. They should receive Form W-2 by January 31. You will also need to file Copy A of Form W-2 and Form W-3 with the Social Security Administration by the same date.<\/p>\n

7. How much do I owe in nanny taxes?<\/h4>\n

You are responsible for paying 7.65 percent of your employee\u2019s gross pay in Social Security and Medicare taxes. Your employee will be responsible for the same amount. Each of you will pay 6.2 percent towards Social Security and 1.45 percent to Medicare.<\/p>\n

FUTA is six percent of wages up to $7,000 in earnings. Your employee is not responsible for this tax.<\/p>\n

8. How do I pay my nanny taxes?<\/h4>\n

You\u2019ll need to file Schedule H<\/a> with your personal tax return. This form is used to report household employment taxes on wages subject to Social Security, Medicare, FUTA, and any federal income tax withheld from your employee\u2019s pay.<\/p>\n

If you haven\u2019t been doing so, you may want to remit your taxes quarterly using Form 1040-ES<\/a>. This will help spread your tax burden over the course of the year rather than as a lump sum at the end of the year.<\/p>\n

9. What tax forms do I need to file my taxes?<\/h4>\n

First, you\u2019ll want to confirm your employee\u2019s legal name, Social Security Number, and current address. These are needed to distribute Form W-2 to your employee as well as Copy A of the W-2 and Form W-3<\/a> to the Social Security Administration.<\/p>\n

To file Schedule H<\/a>, you\u2019ll need:<\/p>\n