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Nanny taxes

hi all - I hired a nanny to watch my LO three days a week. She requested that we take taxes out of her paycheck. Has anyone used a nanny payroll service? Any recommendations? It looks like the one through Care.com would cost us about $800 a year so I'm not sure if it makes sense financially. TIA!

Re: Nanny taxes

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    We used GTM to do payroll and taxes. They took care of everything and I highly recommend them to anyone looking for a payroll service. The state misfiled some of our paperwork and sent us a $2000 tax bill for one quarter (that included a "late fee" for taxes we didn't owe) and GTM took care of it immediately after we sent them a copy of the letter the state sent us. I can only imagine the hassle we'd have had to deal with if we didn't use them. We were doing a nanny-share, so that also made it more complex.

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    We use intuits product - you can find it at https://payroll.intuit.com/online-payroll/

    Takes time to setup, but once everything is setup for your employee, payroll takes me less than five minutes, and paying quarterly taxes is extremely simple.  They even have an app so I can do payroll in about 30 seconds while traveling.  Cost is about $20/month I believe, and I think I signed up with a special that had one or two months free.
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    Not trying to highjack the thread - but this brings up another Tax-nanny related question for me.

    When I hired my nanny, she said she was going to have her accountant claim the income on her end, so we could claim the expense on our end. Is that basically the same thing, only her accountant takes it out in one big chunk during tax time? I've just been saving the carbon-copies of the checks I write her.

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    Thanks all!

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    NLewis1 said:

    Not trying to highjack the thread - but this brings up another Tax-nanny related question for me.

    When I hired my nanny, she said she was going to have her accountant claim the income on her end, so we could claim the expense on our end. Is that basically the same thing, only her accountant takes it out in one big chunk during tax time? I've just been saving the carbon-copies of the checks I write her.

    You can't 'deduct' the expense of a nanny, but you might be able to use pre-tax money like in a flexible spending account thriugh your employer or get a childcare credit.
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    We use Breedlove. Expensive but they take care of almost everything.

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    No, unfortunately, that's not the same as paying your employee on the books.  When you're set up as an employer, you pay your own employer taxes throughout the year- social security, medicare, state and federal unemployment insurance.  The employee can't just claim income and call it a day.  You need to be set up as an employer and pay your share of taxes, like businesses do. 
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    DallasHornDallasHorn member
    edited January 2015

    Here's my 2 cents...We did 5 years of paying taxes on a nanny. In Texas, the only state tax was a quarterly unemployment, so if you live in a place with state tax, I don't represent that here. Also, there is a way another way do to handle nanny taxes via a schedule H annually with your own tax return. Again, that is not something I did, but just another option.

    I did taxes myself via Excel. I set up formuals to calculate pay each week and taxes along with YTD amounts. Each pay period was a tab in excel and I would print out each week with her check as her earning statement. Happy to provide this file if someone wants it.

    A very oversimplied example is this...

    Pay = rate x hours

    Fed withholding - -this comes from the IRS and is based on the W-4 the nanny completed. It's a set amount based on frequency of pay, deductions, and pay amount. This is completely withheld from the nannys pay by you (the employer) and you deposit it electronically to the IRS on a regular basis.

    Medicare - - this is a set %. Employee pays half and you pay half. You withhold from the employee and again deposit this to the IRS along with your half.

    SS - - this is a set %. Employee pays half and you pay half. You withhold from the employee and again deposit this to the IRS along with your half.

    Annually you also need to file and contribute to federal unemployment. In Texas, state unemployment is done quarterly.

    I speak from experience when I say that these costs do add up for a nanny. Especially if you end up terminating a relationship with a nanny and they claim unemployment. Then your unemployement rate is raised.

    Good luck.

     

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