I have been hearing of the 'nanny tax' for some time. I have only had part time babysitters here and there as my son was put in nursery school at a young age. Motherburg spoke with expert Lori Bolas of SurePayroll to understand this tax better. Thank you Lori for the insight on this tax especially during tax time!
MB: What is the 'nanny' tax?
The ‘nanny’ tax, otherwise known as the “household employment tax” is an IRS requirement if you pay your nanny or other household employees such as a housekeeper, babysitter (over 18 years old) or dog walker over $1,000 per quarter or $1,900 throughout the year.
The ‘nanny’ tax is comprised of Social Security and Medicare combined, referred to as FICA; and federal unemployment tax, known as FUTA which is 6 percent. The FICA tax equals 15.3 percent of wages and is generally split between the employee and employer.
MB:When do I file?
Nanny taxes are due with your federal income taxes. So by April 15 you need to file a Schedule H with your federal income tax return (Form 1040). Other important dates: January 31 - a W-2 is due to your nanny on or before this date February 28 - Copy A of the nanny’s W-2 is due to the Social Security Administration if you mail them by this date. As the Household Employer, you’ll also need to fill out a W-3 and send it with the W-2.
You can make it easy on yourself by using an online payroll service like SurePayroll (www.surepayroll.com). This makes paying the taxes super quick, easy and inexpensive. You just enter your nanny’s hours online or on your Smartphone or mobile device, approve the hours and send. You can pay your nanny with direct deposit or you can print a check from the system.
Your nanny gets paid on time and the taxes are automatically deducted, filed and paid to the appropriate agencies. In addition, you can produce signature-ready Schedule H and W-2s, saving you from filling out and filing confusing tax forms. (Not all payroll services do this – so if you do go with a service be sure you understand what you are getting!)
MB: How does a family know they need to pay this tax, is it essentially when they have a nanny 'on the books'?
It has to do with how much you are paying your nanny each year. If you pay your nanny more than $1,000 per quarter, or $1,900 throughout the year, you are required by the IRS to pay the tax. Learn more about nanny taxes & nanny payroll services.
MB: Does this tax apply to a daycare?
If your child is at a day care center and not cared for in your home, employment taxes for your child care provider are handled by the center or provider.
MB: How about any laws that pertain specifically to us New York/Brooklyn moms?
When it comes to nanny payroll, you have to worry about federal and state requirements. It’s important to know that different states have different requirements. A great resource for information on NY state requirements can be found at
MB: What are the advantages to having a nanny on the payroll versus not?
Some families may be unaware of the law in this case, and that could cost them. Failure to pay the nanny tax can set you back with fines and penalties up to $25,000! Not to mention all of the stress of a time-consuming audit. In addition, paying and filing your nanny taxes helps ensure your nanny is eligible for appropriate social security and Medicare benefits upon retirement, so you are in turn helping take care of the person that helped take care of your precious little ones!
Lori Bolas is a working mom and a director at SurePayroll. She is passionate about helping working moms and dads with easy nanny payroll - which means more time for their kids and no worries about the ever-changing tax codes. The more we do this - the better I sleep at night!”
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