Nanny Tax Rules Might Affect You

The household employee tax — which you may know as the “nanny tax” — hasn’t made the headlines lately. But the filing requirements still exist, and they may apply to you, if you hired people to help around the house in jobs such as caregiving, housekeeping, or gardening during 2013.

Here’s an overview:

  • Are you an employer? If you pay someone to work in your home and you have the right to tell them what work to do and how the work must be done, the answer is most likely yes. That’s true even if the employment is temporary or part-time.
  • What taxes do you have to pay? If your household employee earned $1,800 or more during 2013, you’re responsible for social security and Medicare taxes. This threshold amount increases to $1,900 for 2014. You can choose to pay these taxes yourself, or withhold them from your employee’s wages. You don’t need to withhold federal income tax unless your employee asks you to.

    You may also owe federal unemployment and state payroll taxes.

    Note. Special rules apply to amounts paid to your parents, your under-age-21 children, and students who are younger than 18.

  • How do you pay the taxes? File Schedule H, Household Employment Taxes, and include the form and the tax due with your federal income tax return.
  • What other forms are required? You’ll need to complete Forms W-2, Wage Statement, and W-3, Transmittal of Wage Statement, and you may need to file forms for state payroll taxes.

    Keep Form I-9, Employment Eligibility Verification, in your file. You’ll also need Form W-4, Withholding Allowance Certificate, if your employee asks you to withhold federal income tax.

Please contact us about household employee tax reporting requirements. We’ll help you file for an employer identification number and determine if tax breaks are available, such as the child and dependent care tax credit.