It’s a new year and you might have new childcare to arrange. Have you thought about payroll? What about having a nanny contract in place? And did you know that you might be able to receive deductions for childcare? It can be cumbersome to think of the many different steps required to set up your new childcare. There are some quick guidelines to help you understand what the nanny tax is and how it might benefit you.
1. Understand what it means to be a household employer.
It’s easier than you might think to be considered a “household employer” to the IRS. If you pay someone $2,200 or more a year to work in your household, then you are a household employer. That includes nannies, housekeepers, in-home caregivers and personal assistants.
2. Learn about Nanny Taxes.
If you regularly pay a nanny or babysitter, you need to withhold taxes each pay period as well as pay taxes of your own. Now that may seem a little less-than-exciting- paying more taxes– but our experts from Care.com HomePay explain that you can SAVE by paying your nanny legally. According to their budgeting calculator, tax breaks can potentially save you more than $2,000 per year!
3. Learn the benefits of Nanny Taxes.
When you pay nanny taxes, there are multiple ways that you and your nanny can benefit. Your nanny will be able to build social security credit and increase his or her future retirement benefits. When your children are older and no longer require full-time care, he or she can receive unemployment benefits while searching for new employment. You receive a tax deduction for a portion of childcare costs. Best of all, you don’t have to worry about incorrect taxes and the chance of getting audited and facing fines.
4. Learn how to Pay Nanny Taxes.
There are four steps to completing your nanny taxes: applying for a Tax ID, calculating and tracking payroll, filing tax returns year-round, and completing year-end tax forms. You can visit the Nanny Tax Guide to learn more. The process might sound like a lot of work, and you wouldn’t be wrong in thinking so. Studies estimate that these year-round payroll and tax processes take up to 55 hours of your time annually. This is where Care.com HomePay can help!
Care.com HomePay is the leading provider for nanny and tax payroll services, serving 60,000 families over the past 25 years. They are highly rated with 96% of their customers recommending their services. Since 1992, HomePay has filed over $2 million in tax filings and processed over $4 billion through their payroll services. Care.com HomePay helps simplify the household employer and caregiver relationship by saving time and stress. You can count on HomePay for taxes, payroll, HR support, and budget planning.
Care.com HomePay can accurately process payroll for your nanny or caregiver each pay period which tracks all the relevant federal and state taxes. When it’s time to file taxes, HomePay generates and sends them to the state and IRS. During tax season, they even send a W-2 to your nanny and file annual forms with the Social Security Administration on your behalf. Along the way, if you ever have a question, HomePay has award-winning staff waiting to help. There is no question too small and no problem too big for their experts.
So while tax season might make you grumble, perhaps Care.com HomePay will provide you with that sigh of relief. Plus, staying knowledgeable about tax laws and requirements can end up saving you a pretty penny (or $2,000 worth). Call 877-367-1976 today for your free consultation and tackle your nanny taxes this new year.