Whether your nanny works full-time, part-time or lives with your family, the odds are likely that in the eyes of federal and state governments, they are an employee of your household. That means that you, as the nanny’s employer, need to make sure that you’re following state, federal and local tax requirements, both when you first bring a person on to work for your family and whenever you issue a payment to them. The same is true for any person who works in your household, such as a house cleaner, gardener or cook. Whether you employ just one person in your household or several, here’s what you need to know about meeting nanny payroll taxes requirements.
Is Your Nanny an Employee?
Before you do anything else, confirm that the person you’ve hired or are about to hire to watch your kids is actually going to be your employee.
The person is typically not your employee if:
- You found your nanny through an agency, and you pay the agency, not the nanny, directly.
- You bring your children to someone else’s home or to a daycare center.
- You hired a landscaping or housekeeping company, and you pay the company, not a person.
- The person sets their own schedule and does work on their own terms, rather than your schedule or terms.
Nanny Payroll Tax Requirements and Forms When You Hire a Nanny
You might not feel like an “official” employer, but if you’re paying someone to care for your children, you most likely are an employer in the eyes of the government. Here’s what you need to do to get started and to make sure you’re following the law.
1. Get a Tax Identification Number
If you’ve never hired anyone to work for your home before, you’ll need to get an employer identification number (EIN) from the IRS. To get your EIN, you’ll complete Form SS-4. An EIN is similar to a Social Security number but is used for employers. If you’re an individual who’s hiring a nanny, you can’t use your Social Security number. You need to get a separate EIN. If you work with HomeWork Solutions, we will obtain this for you.
2. Get an Unemployment Insurance Account Number
In addition to paying federal unemployment tax, you generally need to pay state unemployment tax. If that’s the case, you’ll also need to apply for an unemployment insurance account number directly from your state. The requirements for setting up unemployment vary from state to state. If you work with HomeWork Solutions, we’ll communicate with your state’s government for you to get you set up.
3. Complete Form I-9
Your new nanny will have to complete an I-9 or the Employment Eligibility Verification form. The I-9 confirms that a person is legally eligible to work in the U.S. and verifies their identity. When a potential employee fills out an I-9, they also have to present approved form(s) of identification, such as a passport. It’s up to the employer to examine the documents provided by an employee to confirm whether they seem legitimate or not.
4. Complete Form W-4
If you plan on withholding federal income tax from your employee’s pay, they need to fill out a Form W-4, which helps you determine how much federal income tax to withhold from each paycheck.
5. File a New Hire Report
Your need to report all new hires within a certain number of days after the hiring date. New hire reports allow each state to check their records to see if the recently hired individual is responsible for child support. The information required on the new hire report can vary from state to state, which is why it’s a good idea to check with your state’s new hire agency before you hire a nanny. HomeWork Solutions does this automatically for all clients’ new hires.
What Nanny Taxes Do You Need to Pay?
For the most part, you’ll need to withhold and pay “nanny taxes” when you pay your nanny. Nanny taxes include:
- Social Security tax: 6.2% of earnings paid by the employee, 6.2% of earnings paid by the employer
- Medicare tax: 1.45% of earnings paid by the employee, 1.45% of earnings paid by the employer
- Federal unemployment taxes: Generally $42 per employee paid by the employer
- State unemployment taxes: Varies by state, expect about $350 per employee
There are some exceptions to the tax rules:
- If you pay your nanny less than $2,700 in 2024, you don’t have to pay Social Security or Medicare tax on their earnings.
- You only need to pay federal and state unemployment tax if you pay your employee more than $1,000 during any quarter of the year, with some state thresholds lower.
- If your spouse watches the kids or one of your children under the age of 21 watches their siblings, you don’t need to pay the nanny tax.
Federal, State and Local Income Taxes
You don’t have to withhold income tax from the paychecks of your nanny and other household employees. But some employees might prefer that you do, as it makes things simpler for them. Income tax amounts vary based on your location, your employee’s earnings and the information they provide on their Form W-4.
Calculating Taxes
You need to know how much you’re paying your nanny to figure out the appropriate amount of tax to pay and to withhold.
- If your nanny receives $1,500 every two weeks, you would withhold 7.65% of that $1,500 ($114.75) for Social Security and Medicare.
- You would also have to pay an additional $114.75 from your own pocket.
- You’d pay ~$50 for federal and state unemployment taxes.
- If you are withholding federal income tax, you’ll need to figure out the right amount to withhold based on your nanny’s tax bracket and the specific information they reported on Form W-4.
Nanny Payroll Tax Filing Responsibilities: Quarterly and Annual
The IRS prefers to get paid several times throughout the year rather than in one lump sum when you file your taxes. Paying taxes quarterly also reduces the burden on you, as it helps to ensure that you have set aside enough to pay your share of FICA taxes and unemployment taxes and that you’ve withheld enough from your nanny’s paychecks.
Quarterly Returns and Tax Payments
Most household employers, to avoid underpayment penalties, file form 1040ES to the IRS on a quarterly basis.
Most states also require quarterly unemployment and withheld income tax payments, but a few expect to be paid monthly.
Annual Filing Requirements
The end of the year brings with it a number of new forms to fill out and distribute. As a household employer, you’ll need to submit the following:
- Form W-2: You need to give each employee a copy of Form W-2 by January 31 for the previous year. A copy of Form W-2 also gets sent to the IRS.
- Form W-3: You send Form W-3 to the Social Security Administration along with copies of Form W-2. You use Form W-3 to report the total number of W-2s you submitted, as well as the total amount of payments you made for income taxes, Social Security taxes and Medicare taxes and the total wages you paid.
- Schedule H: If you have any household employees, you’ll need to complete and file Schedule H when you file your tax return for the year. You need to complete and send in Schedule H even if you don’t plan on filing Form 1040. If you are filing a tax return, you’ll use Schedule H to calculate how much tax you paid and to report the amount of tax you paid for your employees on Form 1040.
- State Withholding Tax Reconciliation forms are typically due in January.
Month-by-Month Checklist for Nanny Payroll Taxes Requirements
Staying on top of your nanny tax obligations throughout the year will help you avoid a hefty tax bill or tax time headaches.
January
- Send Form W-2s to employees.
- Submit Form 1040-ES, employer’s quarterly federal tax return, by January 15 for the 4th quarter of the previous year.
- Submit Form W-3 and all Forms W-2 to the Social Security Administration by January 31.
- Submit state unemployment tax return for the 4th quarter of the previous year.
- Submit state Withholding Tax Reconciliation form to your state if withholding state income taxes.
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
February
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
March
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
April
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
- File IRS tax Form 1040 with the Schedule H and most state personal tax returns by April 15.
- File Form 1040-ES to remit federal employment taxes for the 1st Quarter.
- Pay state income tax as required.
- State unemployment taxes for the previous quarter will be due between the 15th and 30th, depending on your state.
May
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
June
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
July
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
- File IRS tax Form 1040-ES to remit federal employment taxes for 2nd Quarter.
- Pay state income tax as required.
- State unemployment taxes for the previous quarter will be due between the 15th and 31st, depending on your state.
August
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
September
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
October
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
- File IRS tax Form 1040-ES to remit federal employment taxes for 3rd Quarter.
- Pay state income tax as required.
- State unemployment taxes for the previous quarter will be due between the 15th and 31st, depending on your state.
November
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
December
- Pay your household employees as agreed, withholding the appropriate taxes.
- Set aside your share of FICA and unemployment taxes.
- Review your employees’ performance and discuss salary and benefits changes for the next year.
Let HomeWork Solutions Manage Your Nanny Payroll Taxes Requirements
Figuring out how much tax to withhold from your nanny and other household employee’s pay isn’t something you need to do on your own. HomeWork Solutions offers essential and complete payroll plans to help simplify the payroll and tax payment process. We’ll calculate how much tax to withhold from your employees and will handle preparing tax returns and making tax payments. If you choose our complete payroll plan, we will even handle paying your employees for you. Most importantly, HomeWork Solutions is on your team, and will anticipate your needs and help you find a solution to any issues that pop up.To learn more about how to simplify your household payroll and how to make sure you’re complying with local, state and federal tax requirements, contact us today.
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