The ‘nanny tax’ is a collection of taxes you are required by law to pay if you meet the criteria. See below to learn who each of these items apply to, and why you and your nanny should care.<\/p>\n
Required if you pay your nanny cash wages of $2,400 or more in 2022 (up from $2,300 in 2021). Some exceptions apply if your nanny is your spouse, your child under the age of 21, your parent, or under the age of 18; in those cases, see the Federal Household Employer Guide<\/a>.<\/p>\n Required if you pay cash wages of $1,000 or more in any calendar quarter of 2022 or 2021 to your nanny. Exceptions are if your nanny is your spouse, your child under the age of 21, or your parent. Unlike Social Security and Medicare, FUTA is entirely employer paid and is not withheld from your nanny’s paycheck.<\/p>\n Some states also impose a state unemployment insurance tax which can be in addition to FUTA or instead of it.\u00a0 This is state dependent and the rate can vary by individual, depending on your household employment history.<\/p>\n Some states require household employers to carry Workers’ Compensation Insurance. Even if it is not required in your state, it is still recommended to protect yourself in case your nanny injures herself while on the job. This needs to be obtained from an insurance agency.\u00a0Talk to one in your area for details around local requirements, cost, and how to purchase. Your homeowner\u2019s insurance policy may provide coverage in some scenarios, so this may be a good place to start.<\/p>\n Withholding federal and\/or state income tax is not required of household employers.\u00a0But if your employee asks you to withhold it, you can.<\/p>\n Due to the additional overhead on the employer to handle this case, some nanny employers choose to instead advise their nanny to estimate their tax burden for the year using a tax estimator to plan accordingly.<\/p>\n For federal income taxes, this can be done via the IRS Withholding Calculator<\/a>\u00a0or IRS Publication 505.<\/a>\u00a0 If your nanny expects to make enough to owe income tax, she can pay estimated taxes on a Quarterly basis via IRS Form 1040ES.<\/a><\/p>\n You may be wondering why not just pay under the table? Besides being illegal, there are benefits<\/a> to both employer and employee to paying legally. For the Employer, you can take advantage of tax-deferred Dependent Day Care plans offered by your employer or you may be eligible for the Child and Dependent Care Tax Credit, as well as not having to fear an IRS audit and worry about legal repercussions. For your nanny, she will be accruing Social Security, be eligible to collect unemployment, and have record of job history to build up credit.<\/p>\n See the complete Federal Household Employers Guide at https:\/\/www.irs.gov\/publications\/p926\/ar02.html<\/a><\/p>\n Download Paycheck Nanny from the Google Play store for Android devices<\/a>\u00a0or the App Store for iOS devices<\/a>\u00a0<\/strong>to automatically calculate taxes and withholdings, track time, create & email pay statements and guide you through\u00a0your tax responsibilities.<\/p>\n","protected":false},"excerpt":{"rendered":" The ‘nanny tax’ is a collection of taxes you are required by law to pay if you meet the criteria. See below to learn who each of these items apply to, and why you and your nanny should care. Social Security and Medicare (aka FICA) Required if you pay your nanny cash wages of $2,400 … Continue reading “What is the nanny tax?”<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":424,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-284","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-advice"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/posts\/284","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/comments?post=284"}],"version-history":[{"count":12,"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/posts\/284\/revisions"}],"predecessor-version":[{"id":570,"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/posts\/284\/revisions\/570"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/media\/424"}],"wp:attachment":[{"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/media?parent=284"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/categories?post=284"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/paychecknanny.com\/blog\/wp-json\/wp\/v2\/tags?post=284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Federal Unemployment Tax (FUTA)<\/h2>\n
(State Dependent) State Unemployment Tax (SUTA)<\/h2>\n
(State Dependent) Worker’s Compensation Insurance<\/h2>\n
(Optional) Withholding Federal and State Income Tax<\/h2>\n
Benefits of going through all this overhead<\/h2>\n
References<\/h2>\n