Nanny Payroll Guide

Confused about how to calculate your nanny’s payroll? Looking for the scoop on how to pay your household employee the right way? Look no further! The IRS isn’t known for making life simple, but we’re here to help you sift through the red tape.

You can use our nanny tax run down to help you understand and handle it on your own.

Of course, if calculating taxes isn’t your cup of tea, we can handle everything for $45 a month. The first month is even free!

Payroll for Household Employees

high chair girl

Who is a household employee?

According to the IRS, nannies, caregivers and most household workers are “employees”. A household employee is not an “independent contractor”, because the family (not the worker) determines things like work hours, work place, responsibilities, etc.

Not to worry, we’ve got you covered, because household employee payroll is our specialty. Actually, it’s all we do!

What does it mean that my nanny is a household employee?

If you pay your household employee (e.g. nanny) more than $2,200 a year or $1,000 a quarter to perform work, you are obligated to pay social security, Medicare and federal unemployment. In addition, you are obligated to pay certain state taxes, like state unemployment. You can find more information about state taxes in our State Nanny Resources. In some municipalities, you even have to pay a local tax when you have an employee.

You are not required to withhold state and federal income taxes unless your nanny requests you to do so, and you agree. However, it is generally a good idea to withhold income taxes; so, your nanny isn’t left to pay her whole tax bill at the end of the year. When you withhold, a small portion of the tax is taken out of every pay check.

Poppins Payroll makes all the state, federal and local tax calculations for you. With Poppins, your payroll will be right on the money.

Nanny sitting under table

Is it worth the hassle or should I just pay under the table?

It gives your nanny important benefits like social security, Medicare and unemployment insurance. In some states, it also provides other benefits like disability benefits or paid family leave benefits. It also allows the employee to build a credit history; so, they can buy a car or a house or get financing. Finally, you never know when you might get nominated for the Supreme Court. And, we all know how that ends if you haven’t paid your nanny taxes!

What forms does my nanny need to fill out?

The IRS requires that your household employee complete Form I-9 and Form W-4. The I-9 serves as a verification that your employee is authorized to work in the United States. The W-4 set forth your employee’s federal income tax elections. You do not need to submit these forms to the government, but you instead keep them for your records. Many states also have tax election forms like the W-4 that address state income tax elections.

When you sign up with Poppins, we email you all the forms that your nanny needs to complete. You simply enter your nanny’s tax elections into your online Poppins account, and we handle the rest!

Where do I need to register as a household employer?

A household employer first needs to obtain a Federal Employer Identification Number (EIN). This is like a social security number for your “business.” Even though you won’t really have a business, because you are now an employer, you need an EIN to report your federal payroll taxes.

Guy with E.I.N.

You also need to report information about your employee to your state’s new hire reporting agency. This allows the government to cross reference and enforce child support obligations and tax liens.

You will need to register with one or more departments in your state. Often, these correspond to the Department of Labor for Unemployment Insurance Taxes and the Department of Revenue for state personal income tax withholding. The names and specifics vary from state-to-state. You can find out more information about your state here.

Finally, in some municipalities, you are required to register for and pay local business taxes.

Poppins Payroll handles all your registrations for you. We’ll get you an EIN, send in your new hire report and establish your state and local accounts. You can go on with your busy life, and we’ll be working to get everything set up for you.

How much are these nanny taxes?

A household employer pays around 10% of the employee’s gross wages in nanny taxes. So, if your employee earns $800, you’ll pay about $80 in state and federal nanny taxes. So that your total cost for that payroll is about $880.

Adding machine

In addition, you will withhold your employee’s portion of the FICA payroll taxes, which is 7.65% of the gross wages. In addition to the FICA taxes for social security and Medicare, the so-called nanny taxes include federal unemployment tax, state unemployment tax and, in some states, additional taxes like disability and paid family leave.

If you want to run a sample payroll or figure out how to gross up your paycheck to cover your nanny’s payroll taxes, check out the great calculators at Paycheck City.

Poppins will make all the calculations, fill out all the reports and submit all the taxes for you. We’ll handle all the state, local and federal taxes that are owed by you and your employee. There are no extra quarter-end or year-end fees with Poppins—just $45 a month for everything.

Do I get any tax breaks?

Your employer may offer a Dependent Care FSA. This is a pre-tax benefit account that can be used to pay for child care. Under federal law, you can set aside up to $5,000 of your pre-tax income to use for childcare expenses.

If your employer does not offer a Dependent Care FSA, you may also be able to make use of the Child and Dependent Care Tax Credit. The Child and Dependent Care Tax Credit gives you a credit against your federal tax liability of up to $600 for one child or $1,200 for two children. You are entitled to a credit of up to 20% on the first $3,000 you spend on one child or the first $6,000 you spend on more than one child.

With Poppins Payroll, you’ll have easy access to all your paystubs. So, submitting for reimbursement from your FSA is a snap!

How do I submit the payroll taxes?

Typically, federal and state taxes are due quarterly along with the required reporting. The manner and timing for paying state payroll taxes (like unemployment taxes) varies from state-to-state. You can find more information on state taxes here.

The best practice for paying your federal taxes is by making quarterly estimated tax payments using Form 1040-ES. Then, when you file your personal federal tax return, you will attach Schedule H to document the social security, Medicare, FUTA taxes, and federal income tax withheld from your household employee. If you wait until after the end of the year to pay these amounts, you may be subject to penalties.

Poppins Payroll will collect all the state, local and federal taxes that are due at the end of each quarter and submit them on your behalf with the required filings. You can sit back while we handle the paperwork.

Calendar showing December 31

What do I submit at the end of the year?

As a household employee, you have some year-end responsibilities:

  • After the conclusion of the year, you need to provide each employee with a completed Form W-2. The W-2 reports your employee's annual wages and the amount of taxes withheld from their paychecks. They will need this to complete their personal income tax return.
  • You also need to submit a Form W-3 to the Social Security Administration which provides a summary of all wages paid and withholdings collected by you throughout a calendar year.
  • You will need to put together a Schedule H and attach it to your annual federal income tax return. This is how you report household employment taxes like social security, Medicare, or FUTA taxes, and federal income tax withholding.
  • In some states, household employers are required to submit an annual reconciliation, which summarizes the state income taxes withheld on behalf of your employee.

With Poppins, annual filings are a breeze. In fact, you don’t need to do anything. We’ll make all the preparations and let you know when it’s ready.

Tutor helping student at desk

Do I have to comply with labor laws like minimum wage and overtime?

Yes! Your household employee is entitled to minimum wage and overtime regardless of whether they are paid hourly or salary. If they are paid a salary, it is best to document the hours worked (and the pay rate) included in the salary amount. The specific overtime and minimum requirements vary by state and even municipality.

Your state may also require you to provide sick leave or PTO. Not to worry, you can set up policies in your Poppins account and track the balances each pay period.

Do I need a written contract with my nanny?

Some states, like California, District of Columbia, Maryland, and New York, require some form of written contract with your household employee. Even if it is not required in your state, it’s always a good idea to use a written employment agreement. It spells out the obligations of both parties, including hours, compensation, duties, benefits and PTO. We’ve put together a Sample Nanny Contract to help out.

The IRS estimates that it would take you 60 hours to comply with the tax rules around being a
household employer. But who wants to spend free time doing nanny taxes?
Let Poppins take the bother out of the books for you.
Poppins Payroll, LLC BBB Business Review Poppins Payroll, LLC | 855-420-1919 | info@poppinspayroll.com Terms of Service - Privacy Policy © 2016 Poppins Payroll®. All Rights Reserved.
vB793B56