Taxes with a in Home Nanny

It's the nanny's responsibility ti clam and pay taxes on her own. You also can call the IRS and ask questions.

If you employ a nanny and pay her more than $1500 per year, she is your employee, and legally you must report her taxes and pay the employer's taxes on her. Keep in mind that she is a bona fide employee just like you are a bona fide employee wherever you work. She deserves fair wages ('fair' in our market is AT LEAST $8 per hour and up to about $15, depending on her experience and education.) She also deserves a written job agreement (check out www.nannyanswers.com or www.nanny.org for an agreement -- they both have one) and fringe benefits such as paid vacation and holidays off.

Check out www.breedlove-online.com. They do payroll and taxes for nannies and other in-home employees.

Good luck...and hire the best person that you can afford.

L.
Parent Coach, Infant Sleep Trainer, and Newborn Specialist
(and former professional nanny of over 15 years)

I WAS A NANNY IN COLLEGE FOR A FAMILY, AND THEY ASKED ME WHICH WAY I WANTED TO HAVE IT DONE. I CHOSE FOR THEM TO TAKE MY TAXES OUT ON EACH PAY CHECK. SINCE YOU WILL BE REPORTING HER AS THE PERSON YOU PAY FOR CHILDCARE TO THE IRS SHE WILL BE RESPONSIBLE FOR TAKING TAXES OUT ONE WAY OR THE OTHER.

I believe she would be considered an independant contractor and as such she would have to pay her own taxes. you might want to find out if there are any forms you would need to file or to give to her at the end/beginning of the year showing wages paid...

Contact a human resource center in your area. They handle it all for you and take it out of your checking account. My agency even sent the check directly to our nanny's house. So there was money exchange betweeen us. They even give you and the nanny a statement at the end of the year for your taxes.

All you have to do is keep track of how much you pay her, cash or check is fine, in January when you file your taxes fill out the form for the Child Care tax credit where you will use her social, name, and if I am not mistaken address and how much you paid her. She claims the income on her taxes and pays accordingly when she files. I own Mom's Tax Service and have been doing taxes for 6 years professionally. Please feel free to contact me for any information.

If you will be paying a nanny more than $1500 this year (may not if you aren't starting until October. . .not sure the hours, etc.) then you ARE responsible for paying taxes and the nanny is as well. It actually is complex - can be done by yourself if you do all the reading, etc. but since we just don't have the time (or the patience) we hired someone to do everything for us. We calculate her pay based on the hourly rate and take out "her" taxes (using a multiplier) and pay her the rest. Quarterly we pay taxes which are "her" taxes that we withheld and the taxes we owe as employers) which are automatically deducted from our bank account. It's very easy from our standpoint because we have someone doing it for us (of course, there is a price in that). But YES you are responsible and can get in trouble with the IRS if you don't pay (and she can as well). Nannies are NOT independent contractors because YOU set their hours not them (i.e. someone who mows your lawn, etc. IS an independent contractor). Here is a fabulous website and service (the company we use to do our taxes - even if you don't use them, the website will point you in the right direction).

http://www.breedlove-online.com/law_employer.html

Good luck!

K.

Edited to add - from IRS website:

We hired a nanny to look after our baby while we work. How do we pay her social security taxes and properly report her income?

A nanny is considered a household employee. A household employer only has to pay social security and Medicare tax only for the employee(s) that receive cash wages that exceed the threshold amount for the year. If the amount paid is less than the threshold, no social security or Medicare tax is owed. If social security and Medicare tax must be paid, you will need to file Form 1040, Schedule H (PDF), Household Employment Taxes. You must withhold the employee's portion of the social security and Medicare unless the employer chooses to pay both the employee's share and the employer's share.

The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's share is 7.65%. You may also be responsible for paying federal unemployment taxes. For directions on household employees, refer to Publication 926, Household Employer's Tax Guide.

I suggest calling the IRS or a tax accountant. If you need a number in Houston, email me privately. Shoot, even H&R Block will be able to answer that. Once you find out what your options are then find out what the Nanny's choice would be. Also, she can pay quarterly taxes if she prefers so it won't have an effect on her yearly ones and it won't come out all at one time.

Good luck,
C.

I believe that you have to report her as the caregiver for your child and include her social security number. She then must report her earnings from you and pay the taxes.

I am an in home nanny. Because my boss pays me cash, he does not take out taxes at the time of payment. At the end of each year, we both take all of our information to a professional because neither one of us are certain exactly how it's supposed to work. It is also less stressful if you have your taxes done rather than try to figure it out. I will tell you that because he does not take taxes out and I do not pay taxes quarterly, I always owe the IRS at the end of the year. Take it from me, have a professional take care of your taxes this year, you have 3 kids, how could you possibly have time for a headache like taxes? Good luck!

You don't have to pay any taxes or take any out on the money you pay your nanny unless you are planning to put her under some unemployment insurance benefits in the event you terminate her. When you report her as who you pay for childcare make sure that you have her social security number. You can also list the expenses along with what you are paying her that will incur after she moves in as non traditional payment. If this doesn't help you can always ask the irs by going to www.irs.gov

hi, i am a nanny (and a mom) and the breedlove company is really good... their website has a calculator that will figure the taxes and everything. you have to register with the government and get an employer ID number, and at the end of every quarter you pay your taxes and in January, you complete the W2 for your nanny... or have your accountant do it :) hope that helps!

I am from Ohio, so the laws may differ... but you should be eligible for a credit by claiming the amount of money that you spent on child care over the last year. In doing this, your Nanny MUST also claim her income that you have paid her over the year or she will get into big trouble, basically for lying on HER taxes. However, you should not HAVE to claim the money that you spent on child care, but like I said, in Ohio, the money that you spent is a deduction. If you are not going to owe any tax anyway, then you don't have to bother with it.

I BELIEVE THIS APPLIES TO EVERYONE DOING CHILDCARE:

YOU(THE PARENT), WILL REPORT THE MONEY PAID TO THE PROVIDER AS CHILD CARE EXPENSES,

YOU(THE PARENT), SHOULD NOT TAKE OUT FOR TAXES.

SHE(THE PROVIDER), WILL CLAIM ALL MONEY RECEIVED AS INCOME EARNED BY SELF-EMPLOYMENT,

SHE(THE PROVIDER), WILL PAY SELF-EMPLOYMENT TAXES BASED ON TOTAL INCOME EARNED.

IT'S THE SAME AS IF YOU WERE TAKING YOUR CHILDREN TO HER HOME, YOU WOULD NOT TAKE OUT TAXES BEFORE YOU PAY THE WEEKLY RATE. YOU CAN ALSO GO TO WWW.IRS.GOV AND SEARCH FOR CHILD CARE TAX QUESTIONS.

I HOPE THIS HAS HELPED.

GOOD LUCK.

M.