Author Topic: Nanny taxes... no idea what to do - use a payroll service?  (Read 2934 times)

MsPeacock

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Nanny taxes... no idea what to do - use a payroll service?
« on: August 11, 2015, 11:11:11 AM »
Hi - Hiring a nanny for about 8 hours per week and plan to pay taxes as appropriate. I have no idea what the process is or even where to start, and I am feeling pretty intimidated by the process. (I've never really done my own taxes - this year I used Turbo Tax and for the 10 years or so prior I had someone prepare my taxes because they were complicated). On top of the nanny tax issue, my ex-husband pays 70% of the childcare costs (I pay, he reimburses me) and so we have to some how split the child care tax credits or something.

Anyhow - advice would be most welcome. I did find that one of the online services is about $20 per month and I think will arrange direct deposit and other things to make life easier. But, I'd just as soon save the $240 per year (well, my 30% share of that) if the forms aren't too complicated. Other online payroll services seemed to be significantly more expensive (e.g. $600-$800 per year plus a monthly fee per employee of $20 or so).

I have about a month before the nanny starts - so enough lead time to get things figured out or a service lined up.

MDM

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #1 on: August 11, 2015, 11:28:24 AM »
You might check http://www.irs.gov/publications/p926/, the Household Employer's Tax Guide.

COlady

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #2 on: August 11, 2015, 02:33:09 PM »
I'm a CPA and just had to go through this myself. I almost paid someone because I didn't want to deal with it (and I'm a CPA that does tax...). I ended up dealing with it after being quoted about $600 per year for a service. I don't have a lot of time right night but can give you a quick run down:

- the person will be your employee so make sure to complete form I-9 and get copies of the appropriate documentation.
- you need to get an EIN for household employee to file Sch H with your individual tax return (easy to get on IRS website)
- you need to pay state unemployment. You will need to fill out application to get account and then pay quarterly.
- you may be required to have workers comp insurance in your state. Should be able to find the answer - use Google.
- you are not required to withhold federal or state income tax for your nanny.
- you can choose to withhold from your nanny's pay (or pay yourself) his/her 1/2 of Mcare/FICA or 7.65%. So example paycheck ($500 gross - $38.25 = $461.25 net)
- you will pay 15.3% FICA/Mcare tax on your nanny's wages on Schedule H of your individual income tax return.
- you should send in the 15.3% of FICA/Mcare tax quarterly using Form 1040-ES


trailrated

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #3 on: August 11, 2015, 05:48:16 PM »
If you pay them as a 10-99 they are responsible. If you wish to pay them as an employee, you are responsible. I used to work at a payroll service provider in the small business division. If this happens to be in Ca, I could tell you what the lowest cost could be to you out the door including highest discount. Usually this is based off of how many check go out, will you be paying them weekly, bi-weekly, monthly, etc.

MsPeacock

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #4 on: August 11, 2015, 07:35:10 PM »
I'm a CPA and just had to go through this myself. I almost paid someone because I didn't want to deal with it (and I'm a CPA that does tax...). I ended up dealing with it after being quoted about $600 per year for a service. I don't have a lot of time right night but can give you a quick run down:

- the person will be your employee so make sure to complete form I-9 and get copies of the appropriate documentation.
- you need to get an EIN for household employee to file Sch H with your individual tax return (easy to get on IRS website)
- you need to pay state unemployment. You will need to fill out application to get account and then pay quarterly.
- you may be required to have workers comp insurance in your state. Should be able to find the answer - use Google.
- you are not required to withhold federal or state income tax for your nanny.
- you can choose to withhold from your nanny's pay (or pay yourself) his/her 1/2 of Mcare/FICA or 7.65%. So example paycheck ($500 gross - $38.25 = $461.25 net)
- you will pay 15.3% FICA/Mcare tax on your nanny's wages on Schedule H of your individual income tax return.
- you should send in the 15.3% of FICA/Mcare tax quarterly using Form 1040-ES

Thank you - this makes me feel much better about my level of confusion and frustration at trying to understand this. And I will say that I think of my self as somewhat "bad" at taxes (which is why I had someone do them for many years). Probably in terms of anxiety and frustration it will be better for me to use a payroll service from the sounds of it. I had one year of self-employment and frankly that sounds significantly easier than what you just described.

COlady

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #5 on: August 11, 2015, 09:18:42 PM »
Trailrated: If you pay someone more than $1,800 per year to watch your children in your home v they ate your employee pet IRS Regs. The Regs specifically stateb that they cannot be treated as an independent contractor.

MsPeacock

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #6 on: August 12, 2015, 04:21:46 AM »
She will be an employee for sure - I do know the regulations related to that, so no question there.

Krnten

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #7 on: August 12, 2015, 06:13:44 PM »
We use the Care.com service called Home Pay but it's expensive.  They do have a LOT of handholding.  I get calls and emails checking in pretty frequently, which I appreciate even if I don't call back.   A number of other services have started too, and are probably less.  There's Intuit, Sure Payroll, etc.  The one thing I would not do is try to do the paperwork myself, and I say this as someone who actually enjoys paperwork. 

Good luck!

MsPeacock

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Re: Nanny taxes... no idea what to do - use a payroll service?
« Reply #8 on: August 13, 2015, 05:18:45 AM »
We use the Care.com service called Home Pay but it's expensive.  They do have a LOT of handholding.  I get calls and emails checking in pretty frequently, which I appreciate even if I don't call back.   A number of other services have started too, and are probably less.  There's Intuit, Sure Payroll, etc.  The one thing I would not do is try to do the paperwork myself, and I say this as someone who actually enjoys paperwork. 

Good luck!

Thank you - I looked into care.com (because that is where I found the nanny). I am going to try Intuit's service because it is $22 per month. I have no desire to handle the paperwork myself. I've got enough that I am tracking w/o adding that level of complexity to it. Maybe after I've seen it done for a year or whatever I'll feel up to trying it myself. Otherwise, it is an expense that just comes w/ the territory.