All you need to know about taxes
To make things easier and faster for both the family and the candidate. We recommend that families hire a payroll and tax company such as Nanny Tax and Payroll Services for Notable Nannies Families from GTM ,Nanny Payroll Service and Household Payroll Services by HWS | Notable Nannies Families! (homeworksolutions.com, or one through their own research. For a set annual fee companies like those mentioned here can relieve families of the responsibility and give peace of mind in it being done right.
However, if the family wanted to do it on their own:
Employers are required to withhold social security and Medicare taxes if paying a nanny at least $2,100 during a calendar year. The taxes required to be withheld the 6.2% Social Security tax and the 1.45% Medicare tax. Additionally, the employer must also pay a matching 7.65% portion of Social Security and Medicare taxes on the nanny’s compensation when it is time to pay the Nanny Taxes. Employers are only required to withhold Federal and State income taxes if the nanny makes that request.
Withholdings should begin with the first paycheck. If expecting to exceed the $2,100 limit, employers should begin withholdings from the outset to avoid the need to catch up on withholdings from a later check. If an employer initially makes withholdings and does not reach the $2,100 limit, the employer can always repay the nanny the taxes withheld from earlier checks.
The employer will need to issue the nanny a W-2 by January 31st of the following year. Employers should ask each nanny to fill out a W-4 form right away. This provides the employer with all the information necessary in the event there is a need to issue the nanny a W-2. An employer needs to complete Schedule H when filing their individual income tax return for the year. Schedule is used to calculate taxes due on the nanny’s withholding and the equal employer’s share of social security and Medicare taxes due. If an employer paid a nanny at least $1,000 in any calendar quarter, the employer may also owe a small amount for Federal unemployment taxes.
The employer may need to consider the need to make estimated tax payments. The Federal nanny taxes due are paid with the employer’s individual income tax return. However, there is a need to consider the additional Nanny Taxes due when questioning if estimated tax payments are required. Some taxpayers find it easier to remit the Nanny Taxes as quarterly estimated tax payments. Any state tax withheld would be remitted to the state separately. This is typically separate from state income tax returns, and rules can vary from state to state.
Good record-keeping is important. Records should be maintained for at least 4 years from the due date of the employer’s individual tax return, as protection in the event of a future audit. Records should include Form W-4 completed by the nanny, dates of employment, dates, and amounts of wages paid and taxes withheld, and proof of any tax payments made related to the nanny’s employment.
