Nanny and Taxes/etc

What you're doing is illegal b/c she is not a 1099 (independent contractor) she is a W2 employee (you set her hours, tasks, etc.)

You need to get an EIN number (Employer Identification Number), take taxes out, match those taxes like your employer does for you, file those taxes on a Qtrly basis and in some states (MN is one) carry Worker Compensation Insurance on her.

We did all of the above for our nanny and used a GREAT service out of TX for all the taxes. They worked out her net pay for us, drafted the taxes (both ee and er) out of our bank account, filed all Qtrly. reports and produced her W2. I HIGHLY recommend them -- Breed Love. They specialize in Nanny Payrolls.

It's about 2X the cost of daycare to have a nanny... most people don't realize that.
P.S. Sherry and Grandma G.... your employer (past employer) is in the wrong. Sherry, unless you come and go as you please and set your own days/hours you are not a 1099 (you take care of your taxes) you are a W2. They are taking advantage of you and it is a state and federal crime punishable by fines.

You, as the employer, are required to pay payroll taxes. Social Security and Medicare taxes. Federal Unemployment taxes. State unemployment and disability insurance stuff.

http://www.4nannytaxes.com/faq/nannytaxes.cfm

You are also required to pay overtime for over 40 hours a week if she is a Live Out nanny. Its the law.

Search the web for links like I provided for reputable information. There are even payroll services you can have do the stuff for you to make it easier.

Best of luck!

ETA~ Yes to the other posters who said the ones filing as independent contractors are wrong wrong wrong! Having a nanny is costly! That nanny needs to also make enough that it is a liveable wage. They will be working alot of hours for you and will need to be able to pay their bills off that wage. I did for 8 years with a great family! I got married and bought a house during that time (and had a child!). I had to contribute to my families finances and pay our bills with that wage. Please consider that and pay fairly and do it right and legally.

Ditto NBinNM and SN. We used a small local firm for doing the taxes. They did the W2 form and quarterly statements. And since our nanny worked more than 40 hours, we adjusted her hourly rate so that the 40 hours regular rate plus 10 hours overtime rate worked out to the overall hourly rate we wanted to pay her.

ditto NBinMN.

as for the deduction you want to take - it is not linked to another taxpayer (i.e. whether they pay or not).

When I have worked as a nanny I worked as contract labor and was totally responsible for my own taxes and any concerns about the IRS or the state. The family's claimed my income on their taxes and I filed as an independent business owner. I had some days off occasionally if one of the parents was off work for the day, no holiday pay, no vacation pay, etc...I just went to work and did my job.

Just make sure you consider this to be true and talk to a CPA to make sure you are doing it correctly.

Keep the checks that you pay her in an envelope at your desk. at the end of the year tell her this is what you paid her and what your claiming. That is how my boss does it. He does not take any taxes out that is done on my end.

If she's agreed to claim what you've paid her as an independent, you need her tax id# (social security number) to file when you do your taxes. Businesses using independent contractors use a W9 form, but I don't know if that's necessary. Just make sure at the end of the year, that you are both sharing the same amount of money on your separate tax forms. You can always check with an accountant to verify.