nanny tax questions

carder0716

I have a couple of questions about hiring a nanny:

1. How do I find out how many taxes we will have to pay on their salary?

2. Am I able to use my work dependent care account for nanny salary, or does this only count if going toward a licensed day care?

 

TIA

kamcfarlane

i would start by reading Pub 926 (https://www.irs.gov/publications/p926/index.html). that should answer most of your questions about how much to pay and how to pay it.

as for the FSA, you are able to use your FSA for a nanny.

HTH!

JillAly

You can hire someone to do a payroll tax for your nanny so you can spread the taxes out quarterly.  Many of my friends do that.  How much you pay in taxes obviously depends on how much you pay your nanny- sorry I'm not more specific. 

The other pp is right- you can use the dependant care account for the nanny.  However, unless your salary is very low, it's often better to take the child care credit than to use the dependant care account.  I might be confusing things but I think you can only choose one or the other.

By the way, you didn't mention it but are you getting worker's comp for your nanny?  If she's working in your home, you want to get it.  It's very easy and only costs a few hundred- I think mine was around $350.  If she gets injured in your home, you could be liable for all her expenses.  This way, you're covered.  I have all the info on it if you're interested- just send me a pm.

kamcfarlane

definitely agree with PP about the workers comp.

as for the flexible spending versus dependent care, you can very likely do both. the maximum you can put in a FSA is $5,000. the maximum amount you can take into account for the dependent care credit is $3,000 per child ($6,000 max).  if you're paying a nanny, it's very likely costing more than $8,000.  you cannot use the same expenses for both the FSA and the credit, but you can still use both if you have enough expenses.  for instance, if you pay $8,000, you can take $5,000 in your FSA and $3,000 of expenses for the credit (which will yield a maximum of $1,050 credit). with a nanny salary, you're probably going to get the full benefit of both.