We have a third child arriving in August and we are considering hiring a "mother's helper" for the first three months. It would be 20-30 hours per week. What are the tax implications of this. Do I have to pay into social security? And what about medicare? Is there a good web site that I could reference? Does it matter how many hours a week I use my nanny for (20 versus 30)? Any help if appreciated :)
If you pay them less than $1,700 during 2010, then you do not need to pay social security or medicare on those wages, but above that, then yes you do. Here is the IRS publication on the subject http://www.irs.gov/pub/irs-pdf/p926.pdf
First you need to determine whether the nanny is a household worker or self-employed. http://www.irs.gov/businesses/small/article/0,,id=97877,0...
If he/she is self-employed, the nanny will be responsible for paying their own taxes. If the nanny is a household worker, you will be responsible for making the correct withholdings/ tax payments on their behalf.
I recommend contacting a CPA either way to ensure you file all of the necessary forms.
If you or your husband plan to run for office in the future, are a government employee, have friends or relatives who would turn you in for hiring illegal workers, or are in any way under the scrutiny of the IRS, you must document wages and/or have your employee (nanny) fill out a 1099.
If you hire through a legitimate agency, they will screen your potential employee and take care of all the paperwork for you.
Blessings......
Hi L.,
When we had our first child, we decided to hire a nanny. We asked our tax accountant what we should do. We did pay taxes, social security, etc. because she was hired as an employee. We then paid those taxes at the end of the year. So, if you have an accountant, he/she can help you set that up.
You can hire a nanny as an "independent contractor", which may be the best way to go if it's temporary and short term The law requires that once you pay someone, including household help (which could be your housekeeper, nanny, gardener, any worker NOT incorporated) more than $600, a 1099 must be filed. Have the person complete a W-9 upon hiring. Keep it on file. When you hit the $750 mark, file a DE1 report with the Employment Development Department. All forms can be downloaded from the EDD and IRS websites. The link for a DE1 is: http://www.edd.ca.gov/pdf_pub_ctr/de1hw.pdf.
The link for contact info to order a 1099 is:
http://www.irs.gov/pub/irs-pdf/f1099msc.pdf
The link for W-9 form is:
http://www.irs.gov/pub/irs-pdf/fw9.pdf
You can decide to make this person an employee which requires income tax withholding from their pay and you will be responsible for employer payroll taxes. In this case, you would be paying into social security, medicare and state unemployment which would be a more expensive way for you to go.
The local EDD office may be able to help you make your decision. The local number is 1-888-745-3886.
Good luck with baby #3!
L.
