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In the COVID-19 era, many parents are hiring nannies and babysitters because their daycare centers and summer camps have closed. This may result in federal \u201cnanny tax\u201d obligations.<\/p>\n
Keep in mind that the nanny tax may apply to all household workers, including housekeepers, babysitters, gardeners or others who aren\u2019t independent contractors.<\/p>\n
If you employ someone who\u2019s subject to the nanny tax, you aren\u2019t required to withhold federal income taxes from the individual\u2019s pay. You only must withhold if the worker asks you to and you agree. (In that case, ask the nanny to fill out a Form W-4.) However, you may have other withholding and payment obligations.<\/p>\n
Withholding FICA and FUTA<\/strong><\/p>\n You must withhold and pay Social Security and Medicare taxes (FICA) if your nanny earns cash wages of $2,200 or more (excluding food and lodging) during 2020. If you reach the threshold, all of the wages (not just the excess) are subject to FICA.<\/p>\n However, if your nanny is under 18 and childcare isn\u2019t his or her principal occupation, you don\u2019t have to withhold FICA taxes. Therefore, if your nanny is really a student\/part-time babysitter, there\u2019s no FICA tax liability.<\/p>\n Both employers and household workers have an obligation to pay FICA taxes. Employers are responsible for withholding the worker\u2019s share of FICA and must pay a matching employer amount. FICA tax is divided between Social Security and Medicare. Social Security tax is 6.2% for the both the employer and the worker (12.4% total). Medicare tax is 1.45% each for both the employer and the worker (2.9% total).<\/p>\n If you prefer, you can pay your nanny\u2019s share of Social Security and Medicare taxes, instead of withholding it from pay.<\/p>\n Note: It\u2019s unclear how these taxes will be affected by the executive order that President Trump signed on August 8, which allows payroll taxes to be deferred from September 1 through December 31, 2020.<\/p>\n You also must pay federal unemployment (FUTA) tax if you pay $1,000 or more in cash wages (excluding food and lodging) to your worker in any calendar quarter of this year or last year. FUTA tax applies to the first $7,000 of wages. The maximum FUTA tax rate is 6%, but credits reduce it to 0.6% in most cases. FUTA tax is paid only by the employer.<\/p>\n Reporting and paying<\/strong><\/p>\n You pay nanny tax by increasing your quarterly estimated tax payments or increasing withholding from your wages \u2014 rather than making an annual lump-sum payment.<\/p>\n You don\u2019t have to file any employment tax returns, even if you\u2019re required to withhold or pay tax (unless you own a business, see below). Instead, you report employment taxes on Schedule H of your tax return.<\/p>\n On your return, you include your employer identification number (EIN) when reporting employment taxes. The EIN isn\u2019t the same as your Social Security number. If you need an EIN, you must file Form SS-4.<\/p>\n However, if you own a business as a sole proprietor, you must include the taxes for your nanny on the FICA and FUTA forms (940 and 941) that you file for your business. And you use the EIN from your sole proprietorship to report the taxes. You also must provide your nanny with a Form W-2.<\/p>\n Recordkeeping<\/strong><\/p>\n Maintain careful tax records for each household employee. Keep them for at least four years from the later of the due date of the return or the date the tax was paid. Records include: employee name, address, Social Security number; employment dates; wages paid; withheld FICA or income taxes; FICA taxes paid by you for your worker; and copies of forms filed.<\/p>\n Contact us for help or with questions about how to comply with these requirements.<\/p>\n \u00a9 2020<\/em><\/p>\n <\/body> In the COVID-19 era, many parents are hiring nannies and babysitters because their daycare centers and summer camps have closed. This may result in federal \u201cnanny tax\u201d obligations. Keep in mind that the nanny tax may apply to all household workers, including housekeepers, babysitters, gardeners or others who aren\u2019t independent contractors. If you employ someone […]<\/p>\n","protected":false},"author":3,"featured_media":14962,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[24],"class_list":["post-14963","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-individual-tax","tag-individual-tax"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14963","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=14963"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14963\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=14963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=14963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=14963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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