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Nanny Payroll Taxes ExplainedKathleen Webb, HomeWork Solutions Inc. Families who employ individuals to work in their home performing nanny, housekeeper, maid and other duties are generally responsible for the payroll taxes for their staff. It is estimated that a family will spend 60 hours in their first year of employment researching the appropriate Federal and State regulations, applying for and tracking State and Federal tax identification numbers, calculating withholding for their nanny, and completing the various State and Federal quarterly and annual tax returns. Families should at a minimum understand the financial implications of the Nanny Tax before they enter into an employment contract with a nanny. Learn more below...
The "nanny taxes" first gained wide visibility during the failed Clinton nomination of Zoë Baird for US Attorney General in early 1993. HomeWork Solutions was founded in March 1993 to provide services to help busy professionals comply with the "nanny tax." Both the employer (the family) and the employee (nanny, housekeeper, maid, etc.) have employment tax responsibilities. The Social Security and Medicare taxes (FICA) are generally the largest taxes. Combined these total 15.3% of the cash wage. This will total almost $3200 a year for a nanny earning $400 per week. The employer has the full responsibility for reporting wages paid and remitting the entire Social Security and Medicare tax amounts to the government. The employer is entitled to collect the employee's portion (7.65%) of the Social Security and Medicare taxes from her payroll. However, if the employer fails to collect the employee's share, the employer remains responsible to remit the entire tax to the government. Employers also fully fund state and federal unemployment insurance programs, averaging $400 per year for each worker. |
