Whether you’re planning to run for public office or not, you may want to take a second look at the “Nanny Tax,” the one that’s been the downfall of several public servant-wannabes over the years. Even if you’re past the age where you need a nanny to look after the children, you could have dozens of other homeworkers who may make you subject to the tax, according to the
Equifax Personal Finance Blog.
When do you have to pay? According to “
The Nanny Tax: How to Pay Nannies, Babysitters, and Home Help,” you need to pay taxes on behalf of anyone who works in your home for $1,700 or more annually and doesn’t have a business license. The exceptions are other people’s kids under 18 (as long s they make less than $1,000 a quarter), your own kids up to age 21, your spouse and (maybe) your parents. The person who cuts your grass and cares for your landscaping, the sitter who stays with your aging parents, your babysitter, your housekeeper – they all fall under the rule unless they have their own businesses.
Even the author of the post, tax expert Eva Rosenberg, admits that keeping up with household employment taxes is not as easy as the IRS wants you to think. You have to get an Employer Identification Number from the IRS and also register with your state. When you first hire, you must complete an I-9, a W-4, and get photocopies of two forms of ID, including a Social Security card.
And you’re just getting started at that point. You have to track employees’ time with time cards, and you have to withhold for Social Security and disability from their paychecks. You must file paperwork quarterly, paying estimated taxes to cover your employees’ Social Security, Medicare and unemployment taxes. Then you will have the annual paperwork you complete so your workers can file their own tax returns and so you can attach information to your personal return. Of course, by April 15th, you’ll need to pay any extras if you underestimated throughout the year.
Rosenberg provides links galore in her post on the
Equifax Personal Finance Blog. And her last tip? Hire a payroll service to do all the work for you. Possibly a great idea, but make sure they have a business license or you may have to pay taxes for them, too!
