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Nanny Payroll Taxes ExplainedKathleen Webb, HomeWork Solutions Inc. What does this mean? Many household workers are paid on a cash wage basis. They agree, for example, to provide 45 hours of child care a week for $400. This is the cash wage. Before employing the nanny, the family and the nanny need to understand whether the employer will be deducting the Social Security and Medicare taxes from the $400 (paying her net $369.40 per week). A word of warning, when they say $400 per week they usually mean $400 take home (net)!
But wait! It can get even more complicated. The nanny in Brooklyn who says $400 per week may expect you to be handling all of her taxes. All? This includes her state, city and federal income taxes when she says all. If she is single, this means that the employee's gross wage is $527.00 per week. Let's illustrate:
[a] When a nanny's income taxes are not deducted she needs to make provisions to pay her obligations herself, usually via estimated payments. As the cart above illustrates, different payroll scenarios have dramatic impacts on the employer's cost and the employee's after tax wage. It is vital that all of this is agreed to before the nanny starts work. A nanny expecting a $400 paycheck who gets a $315 paycheck instead is not going to be a happy worker, and this type of tension at the beginning of the relationship can irrevocably damage the trust between the nanny and the family. Rules, tax rates and filing frequencies vary among states. HomeWork Solutions provides tax and payroll solutions to nanny employers nationwide. You are invited to visit them on the web, or phone 1-800-NaniTax to learn more about your obligations and their services. Learn more...
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