Nanny Taxes Made Easy with HomePay

This post is sponsored by HomePay.

Did you pay your nanny $2,100 or more last year? Then the IRS requires you to pay taxes. Filing taxes can seem like a daunting task, but experts at HomePay can help save time and stress. HomePay will break down what nanny taxes are and how to go about paying them. HomePay is the leading provider for nanny and tax payroll service since 1992. They have filed over 2 million in tax filings and processed over $4 billion in payroll. HomePay has helped tens of thousands of families over the years and can help set you and your nanny up for tax success.

What is the Nanny Tax?

If you have a nanny or a household employee, the IRS says you are a household employer. Household employees can include a babysitter, housekeeper, in-home caregiver or personal assistant that made $2,100 or more last year to perform work in your home. The IRS requires household employers to withhold taxes from their nanny each pay period (as well as pay taxes of your own). The nanny tax includes federal and state tax requirements which are detailed in IRS Publication 926. This tax includes:

  1. Taxes withheld from the employee:  Social Security and Medicare taxes (FICA), as well as federal & state income taxes.
  2. Taxes paid by the employer:  Social Security and Medicare taxes, as well as federal & state unemployment insurance.

Here are the 4 Required Steps to Pay Nanny Taxes

  1. Applying for Tax ID: Both federal and state tax identification numbers are required in order to report nanny taxes. Get the Federal employer identification number (FEIN)  from the IRS. Then use this number to obtain the state employer identification number from the appropriate tax agency.
  2. Calculate and Track Payroll: Employers need to accurately calculate a nanny’s gross pay, the taxes withheld from them, and the corresponding employer taxes each pay period.
  3. File tax returns year-round: Typically, on a quarterly basis, you will need to file state tax returns. Some states do require monthly or annual filings, so be sure to confirm. Be sure to send 1040 estimated payments to the IRS four times per year.
  4. Complete year-end tax forms: Employers must provide your nanny with a Form W-2 by the end of January each year so they can use it to file their tax return. The Social Security Administration requires you to file Form W-3 and Form W-2 Copy A. This lets them know that you’ve properly withheld FICA taxes from your caregiver and remitted FICA taxes of your own throughout the year. You need to prepare a Schedule H and file it with your federal income tax return. Your state may also require an Annual Reconciliation form, which summarizes the state income taxes you withheld from your nanny. Check out the HomePay’s full guide to Nanny Taxes here.

Does this sound daunting? If it does, know you are not alone. HomePay is here to be your trusted Tax Professional. HomePay Make Nanny Taxes Easy

These four year-round payroll and tax processes can take up about 55 hours of your time annually. However, HomePay has created a streamlined, trustworthy system to accurately manage all aspects of the Nanny Tax.

HomePay is here to process nanny payroll each period all while keeping track of federal and state taxes. When it’s time to file tax returns, they will generate and send them to the state and the IRS. During tax season, they’ll send a W-2 to your nanny and file annual forms with the Social Security Administration on your behalf. This is an incredible value and gives employers the peace of mind knowing it is being handled properly. HomePay is an expert in nanny and household taxes and can save you time and stress. 

Plus, HomePay has award-winning staff that will talk you through solutions if a problem should ever arise. There is no question too small and no problem too big for their experts. Call them today at 877-367-1976 to get your Nanny Taxes squared away and have peace of mind this tax season.

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Courtney was born and raised in Louisiana where she met her husband (married in 2005). Since then they have moved several times, but finally feel very settled in NW DC after moving back a little over two years ago. She has four energetic kids: Cormac (2010), Evangeline (2013), and Solomon (2016), and Antoinette (2019). She thinks motherhood is absolutely wonderful, but she is constantly challenged and stretched in ways she couldn't have imagined. She spends her days talking Star Wars, legos, playing dress-up, and chasing her toddler. We all know motherhood is challenging so she wanted to band together with other mothers to start this site to inspire, learn, and grow together. She loves morning coffee, chocolate, chatting with people since she's an extrovert, a clean house (which is rare these days). She dislikes when her kids don't listen the first time, she abhors littering, and doesn't enjoy shopping.