Nanny tax concerns run in a cycle and after 18 years helping families with nanny tax compliance we see reoccuring patterns. HomeWork Solutions' staff report receiving several calls a day last week from nannies seeking guidance when their nanny employer has not provided them with their W-2 form.
By definition nannies are household employees. This means that their employers, the family, have employer tax reporting responsibilities including the issuance of a Form W-2 to all household employees who earned $1700 or more in the calendar year. This is commonly referred to as the "nanny tax." (IRS Publication 926 Household Employers Handbook)The family is responsible for:
- Paying the employer portion of the Social Security and Medicare taxes (FICA) to the IRS.
- Withholding and paying the employee portion of the Social Security and Medicare taxes to the IRS. If the family failed to withhold (collect) this tax from the employee, they are still responsible for paying this to the IRS. (IRS Publication 926 P. 4)
- Wage reporting and paying state unemployment taxes (SUTA).
- Paying the Federal Unemployment tax (FUTA).
- Workers Compensation Insurance, governed by state regulations.
- Issuing a W-2 form to any household employee who earned $1700 or more in the calendar year.
- Completing Forms W-3 and W-2 and submitting to the Social Security Administration.
The nanny is personally responsible for her Federal and State income taxes. The family may have agreed to withhold income taxes from the nanny's paycheck. In that case the amounts are indicated on the W-2 form. Withholding income taxes is not a legal requirement for families. If they were not deducted, it is the nanny's responsibility to pay these amounts.
All U.S. residents are legally obligated to report their income and pay any income taxes on an annual basis. A missing W-2 form does not relieve the nanny of her responsibility to report her income. Failure to do so is felony tax evasion!
Nannies, if you were not issued a W-2 and want to know the steps to take, we have detailed instructions and sample forms available to assist you at the 4nannytaxes.com website.