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Full-Time Nanny, Monthly Salary, Need Tax Help

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  • Full-Time Nanny, Monthly Salary, Need Tax Help

    Long time forum reader, first time poster.

    I have recently hired my mother to be my full-time nanny for our 5 mo old. After reading through the posts on this web site, I thought I may be able to simplify the taxes by paying her a monthly salary instead of by the hour. The monthly salary is static. We are well above the taxable threshold already, and do plan on paying the taxes.

    What would be the best way to ensure we are correctly taking care of the taxes in this particular situation? Would there be a simple solution to avoid using a CPA or a website like care.com???

    Any help is much appreciated in advance.

     

     

  • #2
    When you say "the taxes" what are you referring to?  It's not like you're a business - if anything your mother is as an independent contractor.  If you're paying her so that you can earn an income then you can qualify for a child care tax credit.  As for your mother, she is responsible for paying taxes on the money you give her.

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    • #3
      I don't have a nanny but I do have a housekeeper. I use quickpay to figure out the SS and Medicare taxes.  I buy the software to pay my employees but use it to figure her check as well. My accountant originally set this system up.

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      • #4
        I don't know for sure but nannies are considered a certain type of employee and need to paid by the hour I believe. Check your state laws.

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        • #5
          A nanny is not an independent contractor. They are an employee and you are responsible for paying employer taxes. There is another thread here about recs to do this. You can use homepay, a CPA, or Google to figure it out yourself. Good luck! Congrats on the baby!

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          • #6
            You'll pay her federal taxes at the end of the year when you file your 1040. You need to check on state income and unemployment taxes along with workmen's comp for filing/payment during the year. Yes, you can DIY and just research your state requirements yourself. I don't recommend trying to do all of this without at least getting some advice from your CPA, however.

            Since it's your mom, at least you don't have to worry about her filing a workmen's comp claim on you, but most states require that you carry a wc policy on a nanny so you should at least be aware of your requirements before you make a decision.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              We've had nannies for years (recently switched to an au pair) and I always did the taxes myself. Our CPA assisted the first year to walk me through everything and make sure it was done correctly. Send me a PM if you want the spreadsheet that I've used. You will have to adjust things for your state but it's not that difficult to do your own taxes.

              And yes, as others mentioned, nannies cannot be independent contractors so you are responsible for providing a W2 etc.

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              • #8
                See IRS Publication 926 Household Employer's Tax Guide. A full-time nanny is a household employee and can not be treated as an independent contractor.

                You can nominally pay a nanny a salary, but it is really just an accounting exercise. They are still non-exempt employees and considered to be paid hourly. They are required to be paid for every hour they work. Live-out nannies must be paid overtime pay. Live-in nannies do not need to be paid overtime pay, except in a handful of states.

                An advantage of hiring your mother is that you/her will not have to pay FICA and you will not have to pay FUTA.

                 

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                • #9
                  There are probably cheaper ways to run payroll but we use https://savvynannypayrollservices.com because after initial setup it is super easy. I think they are raising prices to $39 a month. It is basically intuit home payroll...which is no longer available. Checks and tax payments are all electronic.

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                  • #10




                    There are probably cheaper ways to run payroll but we use https://savvynannypayrollservices.com because after initial setup it is super easy. I think they are raising prices to $39 a month. It is basically intuit home payroll…which is no longer available. Checks and tax payments are all electronic.
                    Click to expand...


                    We also used Savvy Nanny Payroll when we hired a nanny for our first child a few years ago.  It was pretty straightforward, but there are just things about having an employee to pay that are confusing.  Their support staff was helpful with my questions.  They don't operate in every state, though.

                     

                    We were lucky that with our second child, my mother, who is retired, moved in with us for 6 months to help with the kids in a multi-generational household set-up.  And my husband likes his mother-in-law, so it wasn't intrusive  

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                    • #11
                      Also used savvy nanny payroll. Thought it was pretty easy to set up and helpful

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                      • #12
                        I did this with my father in law last year.  If I had a chance to do it again, I would hire a payroll service.  I have literally spent about 50 hours and stacks of paperwork when there was an error on one of my forms (I thought I had researched it well and done everything right.)  I notified the IRS right away, but each time they messed it up a little more.  It took about 8 tries to get it fixed and I have a small phone books worth of paperwork to prove it.

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