Many parents are surprised to learn that when hiring a nanny or babysitter, they enter into a true employment relationship, and as such, have employer tax obligations.
Anytime parents pay a nanny or babysitter more than $1800 per year, they’ll be subject to employment taxes. Even if a babysitter only comes once per week or occasionally, if she was paid more than $1800 throughout the year, there will be a tax obligation.
While Morningside Nannies only refers nannies and babysitters who prove they are legally eligible to accept employment in the United States, as the employer, you must complete and keep on file form I-9 to verify your nanny or babysitter is eligible to legally accept work in the United States.
As a household employer, you will be responsible for:
Since the IRS only allows employers to remit the employee and employer portions of Social Security and Medicare, some employers prefer to withhold and pay both the employer and employee portions.
In addition to tax obligations that are equivalent to roughly 10% of the nanny’s gross salary, employers must also provide their nanny or babysitter with a W-2 form at the end of each year. Issuing a 1099 form instead is considered misclassification of your employee and can result in severe consequences including back taxes, interest and fees.
For parents who want someone else to handle their household employee’s payroll and taxes, Breedlove & Associates, a household payroll and taxes expert can do so for a fee. Clients of Morningside Nannies may contact Breedlove & Associates at 888-273-3356 for a free consultation.
For parents who wish to avoid having to deal with nanny and babysitter payroll and taxes altogether, our FLEXCARE program may be a suitable option. Through the FLEXCARE program, you pay our agency an enrollment and a flat weekly fee and we pay your caregiver, as well as handle all payroll and tax obligations for you.
When it comes to hiring a nanny or babysitter, it doesn’t matter if you hire her for a day or hire her to provide full-time care. As long as you pay her directly, control her hours, give her instructions, and supply the equipment she uses, she is your employee and not an independent contractor.
Failure to abide by tax laws can have consequences. Avoiding taxes amounts to tax fraud that can be discovered should your employee file for unemployment or Social Security benefits. Should an employee or past employee report you at any time, you may be liable for back taxes, interest and penalties.