Nanny Tax

Paying someone to watch your child may seem like a routine affair, but technically you probably become an employer the moment you hire babysitting services in your home. While there are exceptions for sitters under 18, babysitters can legally be seen as employees. This means you might owe babysitter taxes to the government. Babysitter Tax Threshold for 2023 The babysitter tax threshold for 2023 is $2,600, which represents a $200 increase over the previous year. In simple words, if you pay a babysitter (age 18 or older) at least $2,600 in cash wages in 2023, the family and the [...]

What is the “Nanny Tax”? Hiring the “right” nanny or other household employee can be a difficult task. Although finding a trustworthy, competent employee will be your top priority, families who choose to hire their own household help will also need to understand the "nanny tax". The nanny tax is a federal tax paid by people who employ household workers and pay wages over a certain amount. The 2023 nanny tax threshold is $2,600, which means if a household employee earns $2,600 or more in cash wages this year, Social Security and Medicare taxes must be paid by the [...]

The COVID-19 pandemic has caused widespread economic disruption, apart from the health challenges that we are still struggling to control. While businesses and employees across different sectors have been badly affected, one of the worst hit segments are the undocumented household workers.  Many families across the country have hired nannies without going through proper documentation to avoid paying the “nanny tax”, immigration laws, and other formalities. Household workers accepted those jobs without considering the unforeseen eventualities such as the coronavirus crisis.  Now thousands of such employers have laid off their household workers because they are concerned about maintaining social distancing, [...]

Following President Donald J. Trump’s emergency declaration pursuant to the Stafford Act due to the COVID-19 outbreak, the U.S. Treasury Department and Internal Revenue Service (IRS) have extended the April 15, 2020, individual federal tax filing deadline to July 15, 2020.   Individual taxpayers may also defer payment of up to $1 million of federal income tax due on April 15, 2020, until July 15, 2020 as well, without penalties or interest.   As most household employers report and pay their federal Nanny Taxes by completing Schedule H and attaching it to your Form 1040, this action effectively  gives domestic employers of nannies, [...]

NannyPay: DIY Payroll Since 1997, NannyPay remains the leading payroll software tool created by household employers for household employers. How Can NannyPay, a DIY Payroll, Help Me?  The new, next-generation NannyPay2 software continues the software's tradition of simplicity, but has been enhanced based upon our company's almost two decades of experience serving the household payroll market. NannyPay2 is feature-rich, yet simple to use. For example, NannyPay will calculate all federal and state withholding taxes for you, and then print a detailed pay stub you can give to your nanny each week. At year end, NannyPay will even print Forms W-2 and W-3 from [...]

6 Steps To "Paying By the Rules" for Nanny Taxes STEP 1: Determining Your Household Employee's Employment Eligibility STEP 2: Registering with the IRS and State Revenue Departments STEP 3: Determining How Much You Must Pay Your Household Employee STEP 4: Determining What Taxes You Must Withhold STEP 5: Learning About Your Other Obligations STEP 6: Filing Reports and Paying the Government

Registering with the IRS as a Household Employer Once you have verified that your household employee can legally work for you, your next step is to register with the Internal Revenue Service (IRS) as a Household Employer. You do this by completing Form SS-4 and sending it to the IRS. The IRS will then assign you an Employer Identification Number, or EIN. An EIN is the number used to identify you as an employer, and will be placed on all your tax filings as an employer much like your Social Security number is used to identify you as an [...]

Paying your Household Employee Although the issue of compensation is generally between you and your household employee, the government sets certain minimum standards. The Federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record keeping, and child labor standards affecting some full-time and part-time workers in the private sector. Domestic service workers such as full-time nannies, babysitters, housekeepers, chauffeurs, and cooks are covered by the FLSA if (1) their cash wages from one employer are at least $2,600* in a calendar year (or the amount designated pursuant to an adjustment provision in the Internal Revenue Code), or [...]

Withholding Household Employee Taxes If your household employee will earn $2,600* or more per year, you must withhold Medicare and Social Security taxes, commonly referred to as FICA. If you will pay your household employee $2,600* or more this year in gross wages, you are required by federal law to withhold and pay Social Security and Medicare taxes, which are sometimes collectively referred to as FICA taxes. One half of the total FICA tax you owe the government is withheld from your household employee's wages. NannyPay will automatically calculate the correct amount of FICA withholding.  You will pay your [...]

Important Tax Forms and Tax Dates for Household Employers By no later than January 30th, you are required to give a Form W-2 ("Wage and Tax Statement") to each household employee you hired the previous year. Form W-2 consists of several lettered and numbered copies. Copies "B", "C" and "2" are for your employee. Refer to our tax forms blog for the complete list of household employer forms.  Remember, you are required to give each employee to whom you paid wages the previous year a Form W-2, even if they no longer work for you. If your employee leaves during [...]