By HomePay
Families hiring temporary or part-time nannies often wonder what requirements apply to them. Here’s what you need to know:
Nannies are employees:
When you hire a nanny — whether temporarily or on an ongoing basis, part-time or full-time— they are considered your employee by the IRS. They are not independent contractors.
Tax requirements:
If you pay a nanny $1,000 or more in a calendar quarter, you must pay Federal and State Unemployment Taxes. If you pay a nanny $2,700 or more in a year, you must also withhold and pay Social Security and Medicare taxes. This means even if you only pay a nanny a small amount each week ($55 per week or more for a year) or only pay a nanny for a few months during the summer, there’s a likely chance you’ll be crossing either one or both tax thresholds.
Other obligations:
In addition to payroll tax withholding and reporting requirements, household employers are also required to adhere to state and federal labor laws, such as paying overtime for hours worked over 40 in a week.
Tax Breaks:
The good news is there are two tax breaks available to all working families with dependent care expenses: 1) Flexible Spending Account (offered through most companies) and 2) the Dependent Care Tax Credit. For families hiring temporary or part-time caregivers, these tax savings will usually exceed the employer tax costs mentioned above – sometimes by as much as $1,000 – $1,500 at least!
Bottom Line:
It’s legally and financially prudent to set up payroll properly and keep track of your part-time and temporary care-related expenses. For an estimate of your tax costs — and your tax breaks — please contact our team to provide payroll calculations.
The HomePay Partnership team can be reached at 877-367-1969 Monday – Friday from 8am – 5pm CST or by emailing partners@myhompay.com.
