Virginia Nanny Tax Rules
Our Guide for Virginia Household Employers
Need help with the legalese around Virginia nanny tax rules? 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 $2,400 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 Virginia 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, register with Virginia Tax and register with the Virginia Employment Commission.
- 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 VA-4 elections and make employer contributions to the Social Security and Medicare and unemployment funds.
- Quarterly - submit the proper paperwork and payments to the IRS.
- Year-End - provide your employee with his or her W-2 form, submit such information to the Social Security Administration, prepare a Schedule H to file with your individual tax returns and submit the proper reports and payments to the Virginia Employment Commission and the Virginia Department of Taxation.
You can find all the information about your federal obligations in the IRS’s Publication 926 – Household Employer’s Tax Guide and your Virginia obligations on the Virginia Employment Commission website and the Virginia Tax website.
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!
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 $2,400 in a calendar year, file Schedule H.
Virginia Directory of New Hires: Complete this form to report your new employee to the State.
VA-4: Have your employee complete this form which dictates how Virginia income tax is withheld.
VEC-FC-27: File this application to establish a Virginia Unemployment Insurance tax account with the Virginia Employment Commission.
R-1H: File this application to establish a Virginia Withholding Account with the Virginia Department of Taxation.
VEC-FC-20/21 and VA-6H: On an annual basis file these reports (along with payment) with the State to report taxes and wages paid during the year.
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?
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.
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.
What other laws do I need to know about?
Virginia’s minimum wage is $9.50 per hour. On May 1, 2022, the minimum wage will increase to $11 per hour. The minimum will again increase $12 in 2023.
Household employers in Virginia 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.
SALARY OR HOURLY WAGES?
In Virginia, household employees effectively must be paid by the hour, rather than by salary. The Poppins system ensures that all Virginia payroll is hourly to comply with the law.
EMPLOYEE IS NOT A VIRGINIA RESIDENT
Generally, residents of the District of Columbia, Kentucky, Maryland, Pennsylvania and West Virginia are not subject to state income tax in Virginia, even if they work in Virginia. So long as your employee marks EXEMPT on his or her form VA-4, state income taxes will not be withheld from his or her paychecks by Poppins.
PAID SICK LEAVE FOR CERTAIN HOME HEALTHCARE WORKERS
Virginia employers must provide paid sick leave to home healthcare workers who provide services to patients enrolled in Medicaid and work on average at least 20 hours per week or 90 hours per month. Employers must provide covered employees one hour of paid sick leave for every 30 hours worked, capped at 40 hours in a year. Accrued sick leave may be used to care for a family member’s or employee’s (i) mental or physical illness, injury, or health condition; (ii) need for medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition; or (iii) need for preventive medical care.
Virginia 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.
In most cases, you have to pay household employees at least twice a month or semi-monthly. For certain high wage employees, you can pay once a month.
WORKERS’ COMPENSATION INSURANCE
Virginia household employers are not required by law to have workers' compensation insurance, but you may want to consider obtaining this coverage. Workers' comp 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.
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.
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.
All employers are required to post certain notices for the benefit of their employees.
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.