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 $39 a month. The first month is even free!
If you pay a household employee such as a nanny, babysitter, caregiver or house manager more than $2,100 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:
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 $39 a month! That includes all you 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!
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 2,100 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 in the previous quarter.
But if that sounds like too much, Poppins can take care of all these filings for $39 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.
If you decide to go this route, we’ve put together a Sample Nanny Contract. This should give you a good idea of the issues that are usually covered.
Virginia’s minimum wage is $7.25
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?
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.
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 their form VA-4, state income taxes will not be withheld from their paychecks.
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.
Your homeowner’s policy may already provide you with some workers’ compensation coverage. You should contact your insurer if you want to add workers’ compensation coverage for your household employee.
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.
All employers are required to post certain notices for the benefit of their employees.
Poppins Payroll® happily presents an easier way to handle taxes and payroll for nannies, housekeepers, senior caregivers and anyone else you employ in your home. Turns out you don’t have to empty your wallet to run a perfect payroll.