Confused about how nanny taxes affect the taxes you pay on your housekeeper’s wages? In honor every mom who appeciates extra help keeping the home in order, we thought we’d clear up some common misconceptions surrounding an employer’s tax obligations on their housekeeper’s wages.
In most situations, housekeepers are employees, not independent contractors.
- Home Work Solutions has written extensively on this distinction.
- This video has helped many of our customers figure out if their housekeeper is considered an employee or an independent contractor in the eyes of the law.
- If you want to be sure that you are engaging an independent contractor and thus avoid the payroll tax obligations, we recommend hiring a cleaning service, such as Merry Maids or Molly Maids.
It is the employer’s responsibility to remit the Social Security and Medicare taxes.
- As an employer, the family has the right to withhold 7.65% from the employee via deductions to cover the Social Security and Medicare Taxes.
- If the employer fails to collect this tax from the employee with periodic payroll deductions, the employer becomes responsible for both the employer and employee sides of the tax, which are 15.3% of the housekeeper’s gross wages.
It doesn’t matter how regularly you employ the housekeeper: If their wages exceed $1,900 in one calendar year, the employer is required to provide the housekeeper a W-2 and is responsible for payroll taxes.
- The family may also be responsible for State Unemployment taxes and Federal Unemployment Taxes.
- The consequences of nanny tax fraud include fees that typically exceed the initial cost of the nanny taxes, and most families are eligible for a childcare tax break if they correctly file their nanny taxes.
- Paying these taxes can be effortless! Check out Home Work Solutions options for automated pay, download our quick start guide, or call us at 1-800-NaniTax.