Nanny Payroll - DIY or pay for service?

[BiggerFishToFI]

We recently had our first, and we've hired a Nanny who is starting in a few weeks. (4 days a week, 7 hours per day, $18/hour)

Trying to decide whether to use a Nanny payroll service or DIY. We're looking at "Poppins Payroll" which is $45/month and they handle tax filings, direct deposit etc.

The other option would be to DIY it, which I would like to do to save the $, but maybe not worth it. I believe I would set a up a business checking account and cut physical checks, while withholding FICA and filing taxes quarterly. Maybe after the initial research / setup it wouldn't be too bad?

Thoughts?

[reeshau]

We had a nanny for the first 2 years; we made sure she had a business, and we paid the business.  Essentially, we outsourced to her, rather than another company.

If you are curious about it, use the service for the first year / rest of this year,  but follow along as if you are doing it yourself--like an open note test.  If you find it too complex to follow, then no harm done, particularly to your nanny.  If it's a piece of cake, then switch at your convenience.

[Lady SA]

we also have a nanny, and I briefly considered DIY, but ultimately decided the payroll service would be worth saving me a headache. I like reeshau's suggestion of "following along" for the first year and then you can switch over. We use Homepay.

You'll have so many other things on your plate--getting the nanny up to speed, figuring out all the other "employer" tasks like annual reviews, getting comfy with each other, helping the kids acclimate, and returning to work yourselves, that taking this task off your plate (at least temporarily) is a great idea. You can always cancel the service at a later date once your family and the nanny are all more settled.

[Abe]

I'm relatively financially and tax savvy, but payroll and taxes is a whole new level of paperwork craziness. If you're in a state with state taxes, probably worth hiring a company to manage it. There are so many different pieces that have one has to track!

[Laura33]

Rule #2 in my life:*  don't fuck with the IRS.  I'm a lawyer, and I still wouldn't want the responsibility to figure all that out.  Pay for the service.  If at some point you feel like you're not getting your money's worth, you can take it over then.


*Right after "never fly in a small plane in a third-world nation."

[turketron]

We also use Homepay, and I agree with everyone else that it's not something I'd want to risk doing wrong if I were to do it on my own. We set up a separate bank account for Homepay to pull the funds from, so all we have to do is make sure that account is funded.

[MaggieD]

The IRS has a fairly accessible and comprehensive guide: https://www.irs.gov/publications/p926 .  We were encouraged by a reference family that it wasn’t bad to do ourselves.  Please note anything other than having them be paid as an employee, and providing them with a W-2, does not follow the legal option.

There are some differences compared to what a business would need to do - I would recommend not setting up a business checking account.  It is also set up to be easier than payroll taxes for a business by being able to take care of some things via your annual personal tax return.

Your state may also have a guide - I’ve found my state to be have a very helpful email address for tax questions.  Whether or not there are state taxes to withhold, unemployment taxes should be paid.

The other set up item to consider is whether you are required to, or would like to, carry workers comp insurance.  Pay stubs can be put together in a simple spreadsheet - there are formulas for withholding to add, but I’d wait to set those up until you have the employee’s W-4, so you’ll know which set to use.  There are plenty of paycheck calculators online to verify your calculations as well.

[rockstache]

I definitely found the service to be worth it. For $40/mo and an extra $50 for the W2, I had the peace of mind that it was getting done right. I also appreciated the ability to easily run payroll reports to verify my dependent care FSA. We used savvynanny and I found them responsive and easy to deal with. Easier than finding and keeping a nanny, for sure.

[MrsSpendyPants]

I got a nanny in July so I just filed my first quarterly taxes.  Did it myself and it's not too bad.