New Mexico Nanny Tax Rules
Our Guide for New Mexico 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 $2,700 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 New Mexico Department of Workforce Solutions and New Mexico Department of Taxation and 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 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 New Mexico obligations in the New Mexico Department of Workforce Solutions Unemployment Insurance Employer Guide and the New Mexico Taxation and Revenue Department Withholding Instructions.
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 $2,700 in a calendar year, file Schedule H.
New Mexico Directory of New Hires: Complete this form to report your new employee to the State.
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.
You are not 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.
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 New Mexico minimum wage is $12.00 per hour. The minimum wage for employers in Santa Fe (city and county) is $14.03 per hour.
Household employers in New Mexico must pay overtime at 1.5 times the regular rate of pay after 40 hours of work in a workweek. If your employee lives in your home, you do not need to pay overtime.
In New Mexico, household employees effectively must be paid by the hour, rather than by salary. The Poppins system ensures that all New Mexico payroll is hourly to comply with the law.
New Mexico household employers are not required by law to have workers' compensation insurance. If you elect to obtain Workers’ Compensation Insurance, you are then subject to a Workers’ Compensation Administrative Fee. As most household employers in New Mexico do not obtain Workers’ Compensation Insurance, Poppins is not set up to pay the Workers’ Compensation Administrative Fee on behalf of our clients. So, if you elect to obtain Workers’ Compensation Insurance, you will have to handle registering for and paying the Workers’ Compensation Administrative Fee.
If you choose to reimburse your employee for driving on the job, 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.
New Mexico law requires employers to give employees an itemized paystub with every paycheck. With Poppins Payroll, we generate paystubs that comply with the law and emailed directly to your employee every payday.
New Mexico household employees have the right to be paid at least every 16 days. An employer must pay employees for wages earned during the 1st to 15th day of the month by the 25th of the month, and for wages earned during the 16th to last day of the month by the 10th day of the following month. With Poppins Payroll, you can choose from weekly, bi-weekly and semi-monthly pay periods, all of which comply with New Mexico requirements.
If a New Mexico employee is terminated, they must be paid within 5 days. If an employee quits, they must be paid no later than the next regular payday.
There are a number of other notices that New Mexico employers must post or provide to their employees.
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 4 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.
An employer must give an employee notice of its intent to reduce the employee’s wages before reducing them.
Household employers in New Mexico are required to provide up to 64 hours of paid sick leave to their employees each year. Sick leave must accrue at least at the rate of 1 hour for every 30 hours worked. An employer can instead allow all 64 hours upfront at the beginning of the year.
Employees can use sick leave for:
- Treatment or diagnosis of illness, injury, or health condition, or preventative medical care.
- Meetings related to employee’s child’s health or disability.
- Care of employee’s family members for treatment or diagnosis of illness, injury, or health condition, or preventative medical care.
- Absence necessary because of and related to domestic abuse, sexual assault, or stalking suffered by the employee or their family member.
Up to 64 hours of unused sick time must roll over to the next year, but an employer can cap the number of sick leave hours that can be used per year at 64 hours.
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.
