Nanny tax paperwork

emilyec1

If you have/had a nanny, do you pay them under the table or formally with all the tax paperwork involved? We thought we were going to go the nanny route because the costs were comparable with daycare centers, but we are incredibly overwhelmed by all of the tax regulations involved, especially paying extra taxes of our own! If you did this and paid taxes as the employer, did it even out with the childcare tax credits you received? TIA!

sooner1981

I can't speak for every situation--because varied incomes make tax situations much different.  For us, we pay $550 a week for 45-48 hours, and will end up paying about $1500 over the year in employer taxes.  But--if you don't pay her legally (on the books), you can't take the childcare tax credit, which usually balances out the taxes you pay.

Don't pay under the table.  If you do and your nanny is ever unhappy with you, she can go to the state to "collect unemployment insurance."  When the state says that they have no record of her being your employee, the state and the federal government can both nail you hard for tax evasion, which can end up costing you all your personal assets--the government doesn't joke around.  Even if you get to keep your house, you still will be out thousands in back taxes, penalties, etc.  Also, if you were required to get W/C insurance or something similar and you don't, and your nanny hurts her back putting your child in their crib or gets hurt driving your kids around in her car, you may be personally responsible for all her medical bills.  My husband and I decided that this "unlimited" personal liability was too big of a risk.  We end up paying our nanny $28,600 per year, and then pay about $1500 in employer taxes and $600 in w/c insurance per year. 

 Check out the "Nanny Tax Company."  There are some great people there who will talk you through all the risks/benefits of paying employer taxes and will set you up with everything you need to pay "on the books."  It is totally overwhelming at first--but with the right guidance, it is totally doable!

erinruns

We had a nanny and I paid her taxes.  Either buy software or use an online payroll service.  There is still a fair amount of tax paperwork, but they will definitely help with things.  Once you do it once or twice, it gets easier.  

For me, even with paying her taxes having a nanny was cheaper than a daycare center.  I would never have considered paying her under the table.  I was spending a serious chunk of money, I wanted the tax credits. 

emilyec1

Thank you ladies!! I really appreciate your responses!

tootlebug

No we don't. Our nanny isn't full time either. So technically we could call it a babysitter 3 days a week. She comes from 8:30-5:00 and I pay her every two weeks. I'm also a sahm so I could say she is just a "helper" too.

I didn't want to deal with "career" nannies partly bc that's what they want, and I wanted to hire young college grads ( with adequate experience) anyways, - they seem to not want the whole w2 thing either.