Nanny Taxes

brittnic86

Is anyone here familiar with nanny taxes? I keep trying to figure it out...but it all seems confusing. Do you withhold each time you pay? Or just deal with it at the end of the year? My SIL will be watching the twins one afternoon a week, and while we will be paying her, I'm honestly not too worried about dealing with it for her. But for one afternoon a week, we will be hiring a nanny....and even though it's just 4 hours a week, over a year, they will meet that threshold for having to pay household employee taxes. I'm going to start interviewing nannies soon...and just don't know what to expect in terms of paying the nanny, and dealing with taxes.

Edit:

Has anyone used a payroll service to pay their nanny? Thinking it might just be easier to pay the $30 a month to have someone else deal with the tax BS -_-

DiFazette

I'd agree with the service.  If you're withholding taxes you need an EIN, to consistently calculate taxes (and stay on top of the ever changing tax codes), provide W2s and send reports to the gov't.  Sounds like $30/mo will be money well spent.  

yellingbanana

If they don't have an EIN, which they won't, then you can use their SS#. Confidentially of course. 
Just google 'free nanny tax information' and you should be able to find a calculator to withhold the right amount. But talk to the nanny you are interviewing, each will have a different preference. 

DiFazette

@yellingbanana I thought EIN's are for employers.  What kind of preference will the nannies have... On what?  Genuinely curious, I don't have experience with nannies, but if I decide to go back to work it could be an option with 3 littles at home.  

brittnic86

yeah I just wanted to be informed before I interview nannies, so that I don't have them give me wrong/shady information.

DiFazette

brittnic86 said:

yeah I just wanted to be informed before I interview nannies, so that I don't have them give me wrong/shady information.

Right... I think you need to fact check the hell out of everything once you become an employer.  It's your butt on the line if it's wrong. 

cgss11

Probably not very helpful, but when I was a nanny, they deducted taxes every week like any other employer. I think spending the extra money for a service may be worth it, especially come tax time. 

a's mom

I hired a nanny for a period of time with my DS. We used a service because for me it was too complicated and way too much work to handle the withholding, quarterly, and annual requirements. It was costly for the service though. There was a monthly fee and then a separate fee for preparing year end taxes. 

yellingbanana

I nannied for 4 different families over 8 years (we moved a bit before buying a house!). 
Some families just paid me the rate I asked for and I didn't claim taxes on it. (I know, I know, terrible of me!) 
With my last 2 positions, I ended up paying taxes. Not fun, but it wasn't a lot. 

One family (my favorite!) figured out the rate that they would need to withhold, and did for taxes, and then still paid me the rate I asked for. Little stuff like that shows that you appreciate your nanny and will keep her around longer! They also gave me birthday and Christmas bonuses, nothing huge, but it was helpful and considerate. 

Also, if you are going with the nanny route, make sure to discuss sick days and time off. A good nanny should be reliable. What you think is fair, and what are their thoughts. 

And regarding the EIN #, I guess I was thinking of when I was running the daycare. Sorry for making it confusing, prego brain to the max over here. But you don't need an EIN, you can just use your SS. 

Feel free reed to ask more questions! 

On on a side note, if you want a more affordable nanny, look for one like me that was bringing her own child with. My daughter was usually the same age as the child(ren - twins) and they loved having another child to play with! I charged about the same as an expensive daycare. Between $300/week and $375/week. But the kids all got the loving feel of a mom it was great, and all the families that I worked for are still thankful that I helped raise their kids. I even do play dates with some regularly, and when I went to the east coast for vaca, I got to visit a family then too! 

cjt121413

I'd talk to a CPA and/or hire a service. One of my mantras in life is never f*** with the IRS. I would guess a nanny could be considered an independent contractor and you could issue a 1099 and let the nanny handle the tax issues, but yeah....I'm not a CPA.

Christinaruth74

What @cjt121413 said. 
It would likely be way easier to hire a service, but ya, you could essentially just issue them a 1099 at the end of the year and they would be responsible for sorting it out. 
I handled paying the subcontractors at my husband's job for a couple of years and we didn't use a service for them. We would issue the checks bi-weekly without withholding anything and then issued a 1099 with their total earnings for the year and let them handle it. Some had EINs, but many just had their SSN which works just the same. 
We just kept a log via QuickBooks, which helped. 

cgss11

I think it would be hard to find a nanny willing to be an independent contractor. I did it my first year because I didn't really know, and the quarterly tax payments I had to make seemed so high that it hardly seemed worth it. Of course, if I knew better I could have factored that in and saved some each check, but I was fresh out of college and didn't think that way. Of course it all depends how much money one is making anyways.

I know you're having twins, but I agree about finding someone with a child already, or even someone else looking for a nanny too. My best job was when I watched two little girls, 5 weeks apart in age, from seperate families. We just rotated which families house we were at.

juliehollz13

I believe that if they have a business license or are legally "self employed"/contractor (not sure all that goes into being officially self employed) they would just get a tax form from you at the end of the year totalling how much you paid them but they would be responsible for claiming it on their taxes and such. 

SarahF8611

This is coming from the other side.....We pay our nanny a rate and she is responsible for for taking out taxes herself and paying them at the end of the year. She had to supply us with her SS# to put in OUR tax forms since we were claiming a deduction for childcare. The IRS audits that the person we put as our childcare provided claimed income as self-employed on their taxes. It has worked well for us but I know she met with an accountant for figure out what she needed to do on her side.

mrsmerc2015

I'm not  an expert on this, but DH and I are considering a nanny (3 kids, 2 from previous relationships, 1 with an odd custody schedule and 2 hours distance between parents so no consistent child care, 1 starting kindergarten so we'll need before/after care (but he's with his dad for the summer), and then the newborn) and I had a long talk with a good friend who employs a nanny. Here were her tips re: the tax issue, from her CPA:

1. Definitely deduct taxes. Whether you do it yourself or let the nanny deal with it, you can't claim the expense on YOUR taxes unless they pay on the income.
2. Definitely talk about it before you all agree to anything so everyone is aware of the expectations. They did not deduct taxes for their nanny the first year, she had never paid taxes before (previous families she'd cared for didn't claim their expense apparently), and they ended up loaning her the money to pay the taxes because she hadn't saved anything all year.
3. Based on their experience, my friend recommended actually managing the deductions yourself, unless your nanny is comfortable/experienced with managing that him/herself. They looked at a service and it was really expensive, her husband is a spreadsheet/financial master so he's doing it himself.

Honestly, this is the part that stresses me out the most about employing a nanny, but I know it is probably the best option for my family, given our situation. I think I'm still secretly hoping I'll be able to telework full time or nearly full time after my maternity leave (a possibility) so I'd only need to hire part-time help!

brittnic86

yellingbanana we only need a nanny for 1-2 days a week, for 4 hours in the afternoon. So I'm not really concerned about sick time or anything. Most of the people who have responded to my ad were just looking for something to supplement their other nanny jobs.

Fortunately (or not, depending on how you look at it) my husband and I work pretty opposite schedules. I'm off Saturdays and Sundays, and he's off Mondays and Tuesdays. I work days, he works afternoons/nights. So it's really only Wednesdays, Thursdays, and Fridays that we need someone to watch the girls from 1pm-5:15pm. Originally my sister was going to do this for us, but thought she was getting a promotion and wouldn't be able to. So we started looking for a nanny. I had one person make some rude comments about how much we were able to pay, which just irks me. This isn't a full time position, it would never be enough to live off of simply because of the small amount of hours we need. Yes, I get newborns can be extra work, and times two at that. But I still felt that $15/hr, for 8-12 hours a week, was decent. Some lady commented that I would be extremely lucky to find someone who would nanny twins for that, and if I did that I should do everything I can to keep that person very happy. Okay....well then don't apply for the job! I clearly posted in the ad that the job would pay $15/hr.

We were starting to panic a bit, because we had planned on paying my sister $10/hr, which would work out to about $500 a month. Which yes I know, for childcare!? But she's my baby sister (21) and we were going to pay her under the table. There's no way we could afford traditional daycare....and at $15/hr we were looking at over $700 a month for a nanny. I'm sure for some of you, that's no issue. But this is about what my family can comfortably afford. My mom telecommutes on Wednesdays, so she offered to watch the girls for free that day. Then my SIL said for $10/hr she would watch the girls on Fridays. So that just left Thursdays. I actually did find a few people who were totally fine with working just one day a week.

But now I guess my sister's promotion fell through? So she may end up nannying for us after all.

FYI, and do know for sure that nannies are NOT considered independent contractors, but household workers.

Thanks for the info ladies!

cjt121413

@bittnic86 you're right, a nanny can't be issued a 1099. See, not a CPA.

This article looks informative: https://plantingmoneyseeds.com/navigating-babysitter-taxes-families-need-know-hire/

yellingbanana

@Brittnic531- I think $15/hr is totally fair, and I live in the Seattle area where daycare cost is sky high.

penelope4612

@Brittnic531 - that's weird re: $15 per hour.  Around here the going rate is probably $15-25 per hour (high end is for multiple children and/or many years experience) but I also live in a very expensive city.  I have a friend who does a nanny share for $18/hour for 2 kids.  

Also, I hate when people are obnoxious just to be obnoxious.  Did she think she was doing you a favor by pointing that out?  Makes you want to email her back and tell her someone took the position, thanks.  I have had similar experience with people being crazy about things you're selling on Craigslist.  If you don't think the price is fair, don't buy it.

brittnic86

@penelope4612 @yellingbanana I have a friend who is a nanny for twins during the summer for $13/hr. I dunno. I'd take $15/hr if it was me. *shrug* if I wanted them to clean my house, take my kids to soccer practice, and cook them dinner, then sure, $15/hr doesn't seem like enough. I guess those things are common for a nanny to do? I'm not expecting any of that! Bottle Feed, change, and keep my kids alive and safe until I get back. That's all asking lol. 

uromys

I would recommend paying someone to handle it. I was a nanny for ten year with two different families. First one payed a payroll service and everything always went very smooth. My taxes were withheld and easily filed at the end of the year. My employer never had an issue or a worry.
Employer number two wanted to do it themselves. For two and a half year he withheld my taxes and filed them. On my end everything went smooth. My papers were in order but he must of not done something right on there end. Long story short but they laid me off and I ended up needing to file for unemployment for a while. Apparently something on his end was extremely wrong and they had all my earning piled into one quarter. It was three months of a mess for me and I'm sure quit a hassle for the last two years for them. 
So from personal experience as a professional nanny, pay for the payroll service. It's less stress for you in the end!

princesslockness

None of these posters are still around. They transitioned to Facebook in February.