You thought the hard part was done when you found a nanny for your kids or a caregiver for your parents. Then, someone told you about nanny taxes.
Of course you want to take care of your new caregiver and there are important benefits to following the law. Following the nanny tax laws gives your caregiver Social Security, Medicare, and Unemployment Insurance benefits. It also allows your caregiver to build credit to rent an apartment, get credit cards or get financing for items like cars or homes. Lastly, you never know when you might get nominated for the Supreme Court. And, we all know how that ends if you haven’t paid your nanny taxes.
Problem is, the IRS estimates that it would take you 60 hours a year to comply with the federal nanny tax regulations. That doesn’t even include everything you have to do to pay New York nanny taxes.
But maybe your nanny only works part-time or part of the year? You couldn’t possibly have to comply with nanny tax laws, right? Not so fast. According to the IRS, if you pay a household employee such as a nanny, babysitter, elder caregiver or house manager more than $2,100 a year, you are a household employer. Under New York law, a household employer becomes liable to pay state unemployment taxes on their nanny if the employer pays gross wages of $500 or more in a calendar quarter. Once you cross these low thresholds, you’re legally required to register and pay employer taxes.
So what does complying with the nanny tax laws actually look like? Well, it’s basically like running a small business. After you have registered as an employer with all the appropriate agencies and reported your new hires, you must withhold certain state and federal taxes for each payroll. Then there are also reporting requirements: on a quarterly basis you must submit the proper paperwork and payments to the correct agencies and on an annual basis you must submit certain other forms like the W2 and Schedule H.
IRS’s Publication 926 – Household Employer’s Tax Guide has all the information about your federal obligations and the Poppins Payroll New York Resource Page has more information on the New York state requirements. But who knew you had to become a tax expert just to hire a nanny?!
If you have better things to do and you want to leave the nanny taxes to the professionals, you can hire a service like Poppins Payroll to run your payroll and handle the nanny tax obligations for you.
Sign-up with Poppins Payroll takes 5 minutes and once you are signed up, Poppins does the rest. Poppins Payroll gets your tax ids, registers your new hires, sets up your state, federal and local accounts, calculates all the withholdings for you and keeps track of your bookkeeping online. Managing your payroll is all at your fingertips on the modern, and super adorable website.
Best of all, at only $39 a month for everything, Poppins is less than half the price of your other options. With free sign up and direct deposit, there is really no reason to spend any of your precious family time doing nanny taxes!
