September 15, 2020

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

For families that juggle working and family obligations, it can be overwhelming and sometimes even feel impossible to manage. As a result, some families may require hiring a nanny or housekeeper to help assist around the house.

Families that are thinking about hiring a nanny or housekeeper may enjoy the extra assistance but also need to think about what the typical pay for hiring the extra help. Will you have to pay additional taxes? Will the nanny or housekeeper be considered 1099 or W-2? 

Here are some answers to questions taxpayers may have when filing their taxes:

Will my nanny or housekeeper qualify as a household employee?

Taxpayers will need to review whether or not a housekeeper qualifies as a household employee and how to place it on their tax return.

If a housekeeper or nanny earns more than $2,100 in a calendar year, the IRS will consider this person to be a household employee. This means that you will be expected to pay employment taxes.

What forms are required in order to pay a nanny or housekeeper?

Taxpayers who choose to hire additional help around the house are not required to withhold federal income tax from their employee’s wages. However, if your employee asks you to withhold taxes from their income, you must agree to do so. You will need to have your employee fill out the W-4 Employee’s Withholding Certificate so the proper amount of taxes from your employee’s paycheck. 

When tax time comes around, you will be required to file a Form W-2 reporting household employee’s income that was earned as well as any withholdings. You will also need to file Form W-3 Transmittal of Wage and Tax Statements with the Social Security Administration. 

When filing your taxes, you will also need to file a Schedule H where total household employment taxes will be reported.

Are there any taxes that I will need to pay for my nanny or housekeeper?

As an employer, you will be expected to pay a portion of your employee’s social security and Medicare taxes, which is 7.65% of their gross wages.

When issuing your employee’s paycheck, you will be responsible for deduction of your employee’s share of their gross pay. In some cases, you may also be accountable to pay federal unemployment taxes.