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How to figure out your nanny’s wages and taxes

For Pennsylvania, where I live, I was able to register online using my EIN, but I had to wait for the paperwork with my assigned tax rate to show up in the mail. The rates and rules vary by state, so be sure to check with your local state for information.

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You can apply for an EIN online and instantly download your “approval” letter. This is what you’ll use to pay taxes associated with your household employee. You aren’t required to withhold federal income taxes, but if your employee wants you to she or he has to complete Form W-4. If you part ways after a year, you still need to hold on to her I-9 for another two years.įorm W-4, Employee’s Withholding Allowance Certificate Your nanny fills out the Form I-9 and you keep it on file for three years after you hired her or one year after she stops working for you.

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Employee formsįorm I-9, Employment Eligibility Verification Here are the forms you and your nanny need to complete at the beginning of her employment. So you can relax if you’ve already found a great sitter. The hardest part of this whole process is finding a person you like and trust with your children. You and your nanny have some forms to fill out Now that we’ve covered the “why” of paying nanny taxes, we’ll talk about the “how”.

Your future political career won’t be sabotaged by a tax scandal.

You don’t have to worry about getting audited later on and owing thousands of dollars in back taxes and fines.

You earn a tax deduction for a portion of your childcare costs.

When your children get older and you no longer need full-time childcare, your nanny can receive unemployment benefits until she or he finds a new job.

He or she also works toward eligibility for premium-free Medicare hospital insurance.

Your nanny builds Social Security credits and increases her future retirement benefits.

Here are the best reasons to pay the nanny tax: In the end I decided to play by the rules because of my husband’s stubborn sense of right and wrong, and because there were financial benefits for us as employers as well as for our nanny. Plenty of people pay their childcare providers in cash to avoid the tax issue. Why you shouldn’t pay your nanny under the table

How to figure out your nanny’s wages and taxes.

You and your nanny have some forms to fill out.Why you shouldn’t pay your nanny under the table.In this guide we make it easy to understand how to pay nanny taxes. Whether you call the person who looks after your kids a babysitter, a nanny, or simply by their first name, your tax liabilities are unambiguous.

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But for many reasons-some unexpected-I hired someone to care for my children at our house.Īccording to the IRS, I now had a “household employee,” which suggests mansions full of gardeners, chefs, personal assistants, and other luxuries way beyond my means.īut no matter. I knew the first option would be cheaper. That left me with the choice between a babysitter to watch my kids in her home, or one who would come to my house. Putting them in daycare wasn’t a great option for us because my freelance work schedule varies throughout the year. I have two children, a three-year-old and a five-month-old. On the other hand, many jobs pay no more than what one would pay for full-time daycare, particularly with more than one child in the family. If one parent stays home, the family saves money in the short-term, but the non-working parent loses current wages and future Social Security benefits.

Loan Payoff Calculator: How Quickly Can You Repay Your Loan?įew choices are harder for parents than what to do about childcare.

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