Anyone DIY nanny taxes?

[nottoolatetostart]

Hello - we are looking at hiring a nanny instead of continuing the daycare route. There are services out there that will file all the proper forms for you to ensure you are following the right guidelines for the nanny tax at the tune of about $1000 per year. It sounds crazy to me and since I am fairly type A and do our own taxes, it seems crazy to me to pay someone to manage this for me.

It does not seem too bad...here are the steps that I have (this assumes we are paying more than $1800 per year - which we will likely do in the first month of hiring her...sigh)...

- Get a federal EIN for ourselves (this is a one-time thing, right?)
- have my nanny complete a form I-9 when she is hired (and verify her SSN card)
- adjust our withholdings at work to pay for her FICA taxes and federal/state taxes (or send in estimated tax payments)
- have her keep a timecard that we agree on (& sign) every week or two so we keep track of hours worked
- keep track of her withholdings (similar to what employer does for me) and give her a statement with each paycheck with that period's wages/withholdings and the cumulative amount earned for the calendar year
- give her a W2 at the end of January
- then include all this info in our 1040 and schedule H when we file our taxes.

Do I have the right sense of it? Anyone already do this?

[Gray Matter]

I looked into doing this and ultimately decided it was too much of a hassle, so we went with an agency, but this was back in the day before I was Mustachian and gladly paid people to do things I didn't want to do. 

The only thing I can think of that's missing is unemployment insurance--not sure if this varies by state or not, but if we'd done it independently, we would have been required to pay for unemployment insurance for the nanny.

[nottoolatetostart]

Thanks, Gray Matter. You are totally right about unemployment tax. (Sigh)

[ritchie70]

- adjust our withholdings at work to pay for her FICA taxes and federal/state taxes (or send in estimated tax payments)

I completely don't understand what this is. Her FICA and fed/state/local taxes need to go against her with the government, not against you. Or am I misunderstanding something?

I think the harder things than doing the appropriate payroll tax filing with the IRS would be unemployment and worker's comp insurance. Those are a little trickier than just doing the right form every quarter and mailing in a check.

[nottoolatetostart]

- adjust our withholdings at work to pay for her FICA taxes and federal/state taxes (or send in estimated tax payments)

I completely don't understand what this is. Her FICA and fed/state/local taxes need to go against her with the government, not against you. Or am I misunderstanding something?

I think the harder things than doing the appropriate payroll tax filing with the IRS would be unemployment and worker's comp insurance. Those are a little trickier than just doing the right form every quarter and mailing in a check.

As an "employer", I pay 7.65% for her FICA and she pays 7.65%, so 15.3% total. Every employer does this.

Looks like fed unemployment is 6% and I have state 3%-ish percent. I still need to check into workers comp ins.