Several pieces of federal legislation from 2010 will impact household employers and the payroll taxes (also known as Nanny Taxes) the household employer deducts from a nanny's pay check.
H.R.4853 - Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act was signed by President Obama Friday December 17, 2010. Significant in the legislation is the temporary reduction of the employee's Social Security tax from 6.2% of gross wages to 4.2% of gross wages for 2011 only. This marks the first time in the history of the Social Security payroll tax that the rates paid by employer and employee are different.
Also in this legislation, the Making Work Pay Credit (which was factored into a mid-year adjustment in federal income tax withholding payments in 2010) expired. The Bush-era tax rates were extended for two more years.
The IRS issued new withholding tax tables the Friday afternoon December 17, 2010. HomeWork Solutions will have the new rates available for both the Social Security tax change and the withholding tax changes available on its Nanny Tax Calculator the week of December 27, 2010. All employers who issue their own paychecks must recalculate the appropriate employee deductions.
H.R. 1586, the Education, Jobs and Medicaid Assistance Act, repealed the Advanced Earned Income Tax Credit (AEIC) after December 31, 2010. Employers who had been including this credit in their employee's payroll may no longer to so.
Lastly, H.R.2847 - HIRE Act which provides for employment tax incentives to most employers who hire new workers who have been unemployed 60 days or more specifically DOES NOT apply to household employment.