Must-Know Tax Information You Need to Know When Hiring A Nanny
Before you hire a nanny, you need to be aware of the tax implications. There are certain taxes that you will have to pay when you hire a nanny and you need to know what they are. You should also be aware of the potential repercussions if you neglect your liability.
What Are the Taxes?
When you hire a nanny, you will need to meet the federal and state requirements per the IRS Publication 926. The taxes you have to know about are those which are withheld from the employee and those which are paid by the employer. The withheld taxes including social security and federal as well as state income taxes. The taxes paid by the employer will be social security and unemployment insurance on both federal and state levels.
You will be liable for these taxes if you are paying your nanny $2,100 or more per the calendar year. It is important to note that the exact tax obligations you have will vary depending on where you live. Not all states will have income taxes while others will have additional taxes that should be withheld from the employee.
Paying the Tax
To pay the tax related to your nanny, you will need to have a federal employer identification number. This is obtained from the IRS and can be used to get your state tax ID number. You will not be able to pay your taxes if you do not have both of these ID numbers.
The tax you pay will be calculated based on the salary of the nanny. You will have to calculate this based on the gross salary of the nanny. There are a number of calculators that you can use to help you determine your taxes.
Once you have the tax amounts, you need to file a tax return. This will generally be done on a quarterly basis, but you will need to check with your state tax board. There are some states that require monthly and annual filings. Your payment to the IRS should be done each quarter.
The Benefits of Paying Nanny Tax
A lot of people view paying tax as a burden, but there are benefits to this. You could be eligible for a tax break which offsets your costs for nanny taxes. Your nanny will also benefit from this as they will qualify for certain long and short-term benefits. These benefits include social security income and Medicare coverage.
The Penalties of Not Paying Tax
If you do not pay your taxes, you could face an IRS audit. This will result in you having to pay back taxes and facing monetary penalties. The IRS will also charge interest on the back taxes based on the length of time that you did not pay the taxes.
Before you hire a nanny, you need to know what the tax implications of this are. If you are paying your nanny more than a set amount, you will have to file tax returns and pay the appropriate taxes. If you do not, you can face an IRS audit and the penalties that come with this. Consider getting in touch with your local nanny agency and ask them about how they deal with their taxes. For example, if you’re looking for the best nanny agency Los Angeles has to offer, look no further than SOFLO Domestics.