How do I take taxes out for my Nanny?
Asked by sducks32
My Husband and I have decided to hire a part time nanny. We are using her 1-2 days per week and she requested that we pay her as an employee and deduct appropriate taxes for her. It sounds like legally that is what we are supposed to do, but I have always just had neighborhood babysitters that we paid under-the-table. How do I go about hiring her as an employee and paying her accordingly as well as deducting and paying the appropriate amounts of taxes without hiring an accountant? It's only 4-6 hours a week so I want to make sure that it isn't going to cost much more than we had expected.

Best Answer:
I think you just pay her and she pays the taxes like an independant contractor does. I think.

I'd just hire someone else. For only 4-6 hrs for a week, that's a ridiculous amount of trouble for you to go through. If it was like 10+, then I could see doing it, but for now, why not just hire a teenager to watch the kid for those hours?
Answered by Alskarinna

Hi, I don't particularly agree with some of the other answers you received to your question. I am familiar with this subject for US residents. As you may already know, if you pay your nanny or babysitter more than $1,500 per year (2006), US law requires you to withhold social security and Medicare taxes. If your nanny works in your home, you generally must treat her as an employee and not as an independent contractor. Paying above the table is really not that difficult and only requires you to become familiar with your federal and state tax deductions. If you receive a paycheck, you probably know what taxes are important so it's just a matter of obtaining a state and federal employer identification number and learning the tax rates. Even that's not difficult if you use a software tool. My company, Essentia Software Corp., sells an inexpensive software program, called NannyPay, which not only does the calculations for you but also includes a Household Employers Guide and IRS Publication 926 to help you understand and comply with the law. You can download and try it for free for 30-days from http://www.nannypay.com For eldercare employers, we sell a similar product called ElderCarePay, which is available at http://www.eldercarepay.com Whether you want to use a software tool or not, I strongly recommend looking at Publication 926, which you can download here: http://64.68.153.69/TaxCalc1/pdf/IRS926.pdf It provides a great summary of federal payroll taxes and procedures for household employees. Visit your state revenue department's web site to find out more about state income tax withholding and employment taxes such as state disability or unemployment contributions. Keep in mind that when you pay your nanny above the table you are building her a salary history, which not only benefits her financially (applying for loans, unemployment eligibility, etc) but also recognizes her as a professional. That's a good thing. Hope this was helpful, and best wishes. Bob Essentia Software Corp. www.nannypay.com www.eldercarepay.com
Answered by essentiasoftware