Have you heard of the “Nanny Tax?” Not sure it applies to your household employment situation? Even if you don’t have a nanny working in your home, the Nanny Tax might apply to you. Housekeepers, gardeners, house or pet sitters, or any other regular household employee who works at your direction could make you eligible for state and federal tax requirements.
What’s the difference between an employee and an independent contractor?
It’s a very common assumption that in-home workers are independent contractors, but this usually isn’t true. IRS Publication 926 states that if you control the type of work your employee completes in the home, how it’s done, or set a specific schedule for the week, they are probably your employee. Independent contractors have the flexibility to work when they want, can complete the job how they see fit, and take financial risks such as advertising.
If you have an employee but are considering paying ‘off the books’, don’t do it. This is not only illegal, but it could be an expensive mistake. You could owe substantial fines, penalties, and back taxes, plus you put yourself at risk for a workers compensation claim should your employee get hurt on the job.
How do you know if you owe nanny taxes?
If you plan to pay your household employee more than $2,300 in 2021, you are required to pay the taxes for employing them. You’ll need to withhold Medicare and Social Security, taxes from your employee’s pay, or cover those costs yourself. You will pay unemployment taxes as an employer, and you may choose to withhold federal, state, and local income taxes to help your employee ensure they have paid all the incme taxes they owe at year end. It is very important to track and calculate your employee’s gross pay accurately to ensure the right amount of taxes are withheld each time.
Not sure where to begin?
We recognize there are a lot of details that come with managing your employee’s payroll and tax filings. And honestly, if you’ve never done that before, it can feel overwhelming and confusing. That’s where our experienced payroll and tax specialists at will step in. Since 1993, we’ve helped families manage each step of the payroll and tax filing process for their employees. We have flexible, customizable plans, so you can find the one that’s right for you. The best part: you will have the peace of mind you need knowing that taxes and payroll are filed accurately and on time, every time.
Call us today at 1-800-626-4829 or contact us here for details.