Don’t do it. Not only is it illegal, it can be costly. On average, failing to pay the Nanny Tax can cost up to $25,000 in fines and penalties.
There are plenty of reasons you’ll want to learn to navigate the Nanny Tax:
- You’ll avoid costly fines and penalties.
- You’ll protect yourself as an employer.
- You’ll help your nanny build her employment history.
- You’ll ensure that your nanny gets the Social Security and Medicare benefits she’s entitled to when she retires.
- You’ll ensure she can receive unemployment benefits when your children no longer require her care.
- You CANNOT claim dependent care expenses, if not done the right way
Under the law, your nanny is considered a “household employee” because you control what work she will do or set requirements on how that work will be done. For any household employee, you may need to withhold & and pay employer and employee contribution Social Security (6.2%) and Medicare taxes (1.45%), pay federal unemployment tax (0.6% on first 7K), and State unemployment, depending on your nanny’s income.
You don’t have to pay Social Security, Medicare taxes or FUTA if your nanny is:
- Your spouse,
- Your child under 21,
- Your parent,
- Under 18 any time during the year. Note: you’ve to collect FUTA taxes if you pay more than $1,000 in a quarter.
How MYTAXFILER Can Help
- We make payroll EASY: mytaxfiler does all the calculations, including taxes, benefits, paycheck deductions, bonuses and more. You just enter hours, review and approve!
- We save time. Mytaxfiler pays and files all the nanny payroll tax paperwork for you. Plus mytaxfiler’s direct deposit is instant, paychecks can be printed at any time and all payroll information is accessible online 24/7.
- We give you peace of mind. Mytaxfiler is backed by years of payroll experience. If you ever receive a nanny tax notice from the IRS, mytaxfiler will take care of it on your behalf.