Massachusetts Nanny Tax Rules

Our Guide for Massachusetts 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 $45 a month. The first month is even free!

Am I a household employer?

If you pay a household employee such as a nanny, babysitter, caregiver or house manager more than $2,300 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.

Why pay nanny taxes?

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.

So what are my tax obligations as a Massachusetts household employer?

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 Massachusetts Department of Unemployment Assistance (DUA) and the Massachusetts Department of Revenue.
  • 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 M-4 elections and make employer contributions to the Social Security and Medicare and 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 Massachusetts obligations in the Massachusetts Household Employer Guide.

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 $45 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. This first month is even FREE!

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What are the required tax and legal forms?

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 $2,300 in a calendar year, file Schedule H.

Massachusetts Directory of New Hires: Complete this form to report your new employee to the State.

M-4: Have your employee complete this form which dictates how Massachusetts income tax is withheld.

But if that sounds like too much, Poppins can take care of all these filings for $45 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.

Do I need to have a written contract with my employee?

If your employee works 16 or more hours a week, you must have a written employment agreement signed by you and your employee that includes: the regular and overtime rate of pay; raises or increases in pay for added duties or skills; work schedule and job duties; rest periods, sick leave, holidays, vacation and personal days; any other benefits; any charges or pay deductions; the eligibility for workers’ compensation; the process for raising and resolving concerns; and the notice of termination by you or employer. For live-in employees, the agreement must also specify why and when the employer will enter your living space, and “cause” for termination. This agreement must be in written in a language that the employee understands. The Massachusetts Attorney General has template employment agreements in English, Spanish and Portuguese.

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.

We’ve put together a Sample Nanny Contract. This should give you a good idea of the issues that are usually covered.

What other laws do I need to know about?

Time is money

MINIMUM WAGE

The Massachusetts minimum wage is $13.50 an hour. It will increase to $14.25 an hour on January 1, 2022.

OVERTIME

Household employers in Massachusetts must pay overtime at 1.5 times the regular rate of pay after 40 hours of work in a workweek. You must also pay overtime if your employee lives in your home.

SALARY OR HOURLY WAGES?

Your employee is entitled to minimum wage and overtime regardless of whether they are paid hourly or salary. If they are paid by salary, it is best practice to document the hours worked (and the pay rate) included in the salary amount.

PAYSTUBS

Massachusetts 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.

PAY PERIODS

Massachusetts household employers are required to pay employees all wages due weekly or bi-weekly. In most cases, hourly employees must be paid within 6 days of the end of the pay period. At Poppins, we comply with this requirement, even for those clients who use direct deposit.

TIME SHEETS

If your household employee works 16 or more hours a week, you must give him or her a timesheet at least every two weeks that shows the number of hours worked each day. The timesheet should be signed or acknowledged by both you and your employee. The state provides sample timesheets in English, Spanish and Portuguese.

WORKERS’ COMPENSATION INSURANCE

Household employers in Massachusetts must provide workers compensation insurance to employees who work 16 or more hours a week. 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.

Your homeowner’s policy may already provide you with some workers’ compensation coverage. You should contact your insurer to check on the status of your coverage. If you need more information on obtaining workers’ compensation insurance, you can call the Workers’ Compensation Rating and Inspection Bureau at (617) 439-9030.

MILEAGE REIMBURSEMENT

Massachusetts 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 taxes, enter mileage reimbursements as a “Reimbursement” amount on your payroll.

TERMINATION WAGES

If a Massachusetts employee is terminated, he or she must be paid their accrued wages on his or her last day of work. If the employee quits, he or she must be paid on the earlier of the next regular payday or by the first Saturday after they quit (if there is no regular payday).

POSTING REQUIREMENTS

All Massachusetts household employers are required to provide their employees with a Notice of Rights for Domestic Workers in a language they understand. The Massachusetts Attorney General provides these notices in Spanish, Portuguese and Tagalog. There are a number of other notices that Massachusetts employers must post or provide to their employees.

PAYROLL RECORDS

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.

REST PERIODS AND MEALS

Domestic workers in Massachusetts who work 6 or more hours in a day have a right to an unpaid 30-minute meal or rest break every workday and those who work 40 or more hours a week must get at least 1 full day (24 hours) off each week and 2 full consecutive days (48 hours) off each month. A worker can give up these rest periods through a written agreement with the employer.   The agreement must be in a language the worker easily understands and must be made before the specified rest period is missed.

If the worker is on duty for less than 24 hours, the employer must pay for all meal, rest, and sleeping periods, unless the worker has no work duties and is allowed to leave during those times.

If the worker is required to be on duty for 24 hours or more, the worker and employer may agree that some meal periods, rest periods, or sleep periods up to 8 hours will not be counted as paid working time.

MEAL DEDUCTIONS

Employers may charge for food and drinks that they provide to the worker up to $1.50 for breakfast and $2.25 for lunch or dinner. The employer may not make deductions unless the worker agrees voluntarily to these deductions in writing in a language the worker easily understands.  The agreement must be made before any deductions are made.

HOUSING DEDUCTIONS

A Massachusetts employer may not deduct the cost of a room or other housing if the employer requires the worker to live in that place. An employer may deduct the cost of housing only if the worker chooses to live there and the housing meets the local and state health code standards for heat, water, and light.   The employer must not charge more than: $35 a week for a room with 1 person; $30 a week for a room with 2 people; or $25 a week for a room with 3 or more people. The employer may not make deductions unless the worker agrees voluntarily to these deductions in writing in a language the worker easily understands.  The agreement must be made before any deductions are made.

SHIFTS OF LESS THAN 3 HOURS

If your employee’s normal shift is three hours or more long, you must pay you for at least three 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 three 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.

MATERNITY LEAVE

Massachusetts employees may take up to 8 weeks of unpaid, job-protected leave for the birth or adoption of a child. They must give the employer at least 2 weeks’ notice of the dates the leave starts and ends.

SICK LEAVE

Massachusetts employers with less than 11 employees must provide each employee not less than one hour of unpaid sick leave for every 30 hours worked. An employer may cap the annual accrual of sick leave for each employee at 40 hours. An employer must allow an employee to carry over from one calendar year to the next up to 40 hours of unused accrued sick leave. With Poppins, you can track sick leave right in our system and the balances will be automatically included on your employee’s pay stubs based on the polices you set up.

JOB EVALUATIONS

Massachusetts household employees have the right to ask their employer for written feedback about their work 3 months after they start working, and once a year after that.

SPECIAL RULES FOR LIVE-IN EMPLOYEES

Employers who have phone or Internet service must give their live-in employees free and reasonable access to those services. If you fire a live-in employee without “cause”, you must (1) give written notice, and (2) allow at least 30 days of the same or similar housing where you are now or in similar housing OR provide severance pay equal to average pay for 2 weeks. If you choose to provide housing at another location or severance pay, you must have at least 24 hours to move out. If you fire your employee for “cause”, you must (1) give written notice, and (2) a reasonable opportunity of at least 48 hours to move out. If the employer makes a written statement in good faith saying you did something that harmed the employer or his/her family or household, the employer can end the job immediately without additional compensation or time to move out.

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.

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