District of Columbia Nanny Tax Rules
Our Guide for District of Columbia Household Employers
Need help with the legalese around nanny taxes? Trying to figure out how to pay your household employee the right way?
We’ve put together a bunch of useful info for you here. If it still seems like too much, we can handle everything for $49 a month. You can even try Poppins for free!*
If you pay a household employee such as a nanny, babysitter, caregiver or house manager more than $2,600 a year or $1,000 in a quarter to perform work in your home (or occasionally even out of your home such as in a nanny share), you are a household employer.
There are important benefits to following the law. It gives your employee Social Security, Medicare and Unemployment Insurance benefits. It also allows her to build her credit. Paying legally sets you up to take advantage of tax credits for dependent care. 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.
As a household employer, you must comply with certain tax obligations, commonly referred to as the “nanny taxes” or “household payroll taxes.” It’s complicated, but generally, after you have registered as an employer with all the appropriate agencies, you must:
- Register – You need to obtain a Federal Employer Identification Number and register with the D.C. Office of Tax and Revenue and the D.C. Department of Employment Services here.
- Report your employee – All employees must be registered with the State within 20 days of hiring.
- Payroll - At every pay period, withhold Social Security, Medicare and income taxes from the employee’s paycheck per the employee’s W4 and D-4 elections and make employer contributions to the Social Security and Medicare, unemployment funds.
- Quarterly - submit the proper paperwork and payments to the correct agencies. The agencies will typically include the IRS and the State.
- Year-End - provide your employee with his or her W-2 form, submit such information to the Social Security Administration, submit state reconciliations and prepare a Schedule H to file with your individual tax returns.
You can find all the information about your federal obligations in the IRS’s Publication 926 – Household Employer’s Tax Guide and your D.C. obligations on the D.C. Office of Tax and Revenue website and in the D.C. Department Of Employment Services Unemployment Insurance Handbook.
The IRS estimates that it would take you 60 hours to comply with the federal nanny tax regulations. That does sound, well, taxing. Poppins can take care of all of it for $49 a month! That includes all your state and federal registrations, new hire reporting, payroll calculations and direct deposit, quarterly state and federal filings and the year-end documents for you and your employee. You can even try Poppins for free!*
If you decide to handle payroll and taxes yourself, you’ll need to know about these forms:
Form I-9: Have your employee complete this form when hired and provide the required proof of ID.
Form W-4: Have your employee complete this form which dictates how federal income tax is withheld.
Form 1040-ES: On a quarterly basis send this form to the IRS along with payment to report taxes from previous quarter. Don’t forget that federal quarter dates do not always line up with calendar quarters!
Form W-2: Fill out Form W-2 if you pay wages of $1,000 or more, and give Copies B, C and 2 to your nanny. Copy A (along with Form W-3) goes to the Social Security Administration.
Schedule H: If you pay your nanny cash wages of $1,000 or more in a calendar quarter or $2,600 in a calendar year, file Schedule H.
District of Columbia Directory of New Hires: Complete this form to report your new employee to the State.
D-4: Have your employee complete this form which dictates how D.C. income tax is withheld.
FR 500: File this application to establish your D.C. Withholding Account and your D.C. Unemployment Insurance Tax Account.
UC-30H: On a annual basis file this report (along with payment) with the State to report taxes and wages paid during the year.
FR-900Q: On a quarterly basis file this report with the State to report withholding for the previous quarter. Typically, the payments related to this report will have to made monthly.
But if that sounds like too much, Poppins can take care of all these filings for $49 a month! We gather all the information we need from you during signup, generate your forms through our system, make all the appropriate tax calculations, and submit everything on your behalf.
The Wage Theft Prevention Amendment Act of 2014 requires all District of Columbia employers to provide a “Notice of Hire Form” to employees in English or Spanish, as applicable, which specifies the pay rate, overtime rate, payday and pay frequency.
You are not otherwise required by law to have a written employment agreement with your nanny or household employee. Still, it is a really good idea to have a written employment agreement with your employee.
A written employment agreement spells out the obligations of both parties, including hours, compensation, duties, benefits and PTO. This is really important if the relationship doesn’t work out, and there is ever a dispute. Just as important, it helps you discuss the important issues with your employee at the outset. This way you make sure you have a good relationship and understanding before you even start.
If you decide to go this route, we’ve put together a Sample Nanny Contract and a Sample Caregiver Contract for your reference. This should give you a good idea of the issues that are usually covered.
The District of Columbia’s minimum wage is $16.10 an hour. The minimum wage will increase commensurate with the Consumer Price Index on July 1, 2023.
Household employers in D.C. must pay overtime at 1.5 times the regular rate of pay after 40 hours of work in a calendar week. If your employee lives in your home, you do not have to pay overtime.
In D.C., household employees effectively must be paid by the hour, rather than by salary. The Poppins system ensures that all D.C. payroll is hourly to comply with the law.
District of Columbia law requires employers to give employees an itemized paystub with every paycheck. With Poppins Payroll, you can have paystubs emailed directly to your employee every payday. Also, advance notice of a change in the payday or a reduction in wage must be given at least one pay period in advance.
District of Columbia employers are required to pay employees all wages due at least twice during each calendar month, unless you have, by contract or custom, historically paid wages less frequently (but not less frequently than once per month). Employers must pay employees on regular paydays designated in advance by the employer. A D.C. employer must pay wages not more than 10 days after the end of a pay period.
Household employers in D.C must provide workers compensation insurance to household employees who work 240 or more hours during any calendar quarter. Workers’ compensation insurance provides benefits to your employee in the event of an on-the-job injury. It can also limit an employer’s liability.
We’ve partnered with Bhalu Insurance, because they’re THE experts in Workers Comp Insurance for household employers. In fact, that’s literally all they do. Check out their site for a free quote or give them a shout. We think they’re pretty awesome.
District employers must reimburse employees if they are required to drive their own vehicle on the job (not including commuting to and from work). You can use the current federal mileage reimbursement rate. Mileage reimbursement is not considered taxable compensation. To ensure the amount is not taxed, enter mileage reimbursements as a “Reimbursement” amount on your payroll.
Employers are required to post certain notices for the benefit of their employees.
If a D.C. employee is terminated, he or she must be paid their accrued wages by the next working day. If the employee quits, he or she must be paid on the earlier of the next regular payday or 7 days from the resignation date.
Household employers must keep accurate records of hours worked by employees and wages paid on an ongoing basis. These records must be kept for at least 3 years. With Poppins, we’ll keep all this information in your online filing cabinet, which you’ll be able to access even after you’re not using us to run your payroll.
A D.C. household employer must provide each employee not less than one hour of paid sick leave for every 87 hours worked by an employee. An employer may cap the annual accrual of sick leave for each employee at 3 days. An employer must allow an employee to carry over from one calendar year to the next any unused accrued sick leave. An employer is not required to pay an employee for unused accrued sick leave upon separation from employment regardless of whether the separation is due to a discharge or voluntary resignation.
With Poppins, you can track sick leave right in our system and the balances will be automatically included on your employee’s pay stubs.
Generally, residents of the Virginia and Maryland are not subject to state income tax in D.C., even if they work in D.C. So long as your employee certifies that he or she is not a D.C. resident on his or her form D-4A, state income taxes will not be withheld from his or her paycheck paychecks by Poppins.
Employers may deduct $2.12 for each meal made available. For four hours or less of work, a maximum of one meal deduction is allowed. For over four hours of work, a maximum of two meal deductions is allowed. For employees that live on the employer’s premises, no more than $6.36 per day can be deducted.
If your employee’s normal shift is four hours or more long, you must pay you for at least four hours of work for each day your employee reports to work. In other words, if you send your employee home early, you still must pay your employee for at least four hours of work. You can pay your employee minimum wage for the unworked hours, even if you usually pay your employee more than minimum wage.
The D.C. Paid Leave Act provides up to 2 weeks to care for your pregnancy, 12 weeks to bond with a new child, 12 weeks to care for a family member with a serious health condition, and 12 weeks to care for your own serious health condition. The benefits are funded by the D.C. Department of Employment Services through a small tax paid by employers.
THE CONTENT OF THIS WEBSITE IS GENERAL AND INFORMATIONAL IN NATURE AND MAY NOT BE APPROPRIATE FOR YOUR SPECIFIC CIRCUMSTANCES. THE INFORMATION IS NOT INTENDED TO PROVIDE LEGAL OR TAX ADVICE, AND SHOULD NOT BE RELIED UPON WITHOUT CONSULTING WITH AN ATTORNEY AND/OR TAX PROFESSIONAL.