Washington Nanny Tax Rules
Our Guide for Washington Household Employers
Need help with the legalese around Washington 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 Washington 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 Washington Business Licensing Service.
- 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, Paid Family and Medical Leave and income taxes from the employee’s paycheck per the employee’s W4 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 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 Washington obligations in the Washington Employer Tax 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 $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.
Washington Department of Social and Health Services DCS New Hire Report: Complete this form to report your new employee to the State.
5208A and 5208B: On a quarterly basis file these reports with the State along with payment to report taxes and wages paid in the previous quarter.
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?
Under the Wage Theft Act, Employers in Seattle must provide employees with a written “Notice of Employment” including the pay rate and must post a notice of the Seattle Labor Standards.
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.
What other laws do I need to know about?
Washington’s minimum wage is $14.49 per hour.
The Seattle minimum wage is $17.27 per hour. Employers can meet this requirement by paying no less than $15.75 per hour in wages and contributing at least $1.52 per hour toward an employee's medical benefits.
Household employers in Washington 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 Washington, household employees effectively must be paid by the hour, rather than by salary. The Poppins system ensures that all Washington payroll is hourly to comply with the law.
Washington 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.
Household employees must be paid at least once a month.
WORKERS’ COMPENSATION INSURANCE
Washington household employers do not have to obtain workers’ compensation unless they have two or more employees who are regularly employed for 40 or more hours a week.
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 employees are entitled to paid sick leave accruing at the rate of at least 1 hour for every 40 hours worked. Unused paid sick leave balances of 40 hours or less must carry over from one year to the next. Any unused sick time does not need to be paid out upon termination. At least once a month, employees must be provided with a notice of accrued and used sick time. With Poppins, we’ll handle this requirement by tracking sick time on your employee’s pay stubs based on the policies you create.
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.
Employers are required to post certain notices for the benefit of their employees.
SEATTLE DOMESTIC WORKERS ORDINANCE
Seattle household employers must provide their employees with a 30-minute unpaid meal break for every 5 hours worked and 10-minute paid rest break for every 4 hours worked. If it isn’t possible to take a meal or rest break, the hiring entity which pays you must provide additional pay for the missed break time. Also live-in employees are entitled to 24 hours of unpaid rest after 6 consecutive days of work.
The Washington Cares Act will provide Washington workers with long-term care benefits (called the Washington Cares Fund) and will be funded by a payroll tax of .58% on Washington workers. The tax was supposed to go into effect on January 1, 2022, but it has now been delayed until July 1, 2023.
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.