How are the nanny’s (employee’s) payroll taxes paid?
Nanny payroll taxes – most household employers have BOTH Federal and State tax reporting and filing obligations.
Household Employers: How to Pay Nanny Taxes Checklist
Federal Employment Taxes
The Federal employment taxes include Social Security tax, Medicare tax, withheld Federal Income Tax (if applicable), and the Federal Unemployment Tax (FUTA).
The household employer is required to collect the employee’s (nanny, housekeeper, etc.) contribution to Social Security and Medicare taxes. Should you fail to collect, you remain responsible to remit these taxes for the employee. The Internal Revenue Service (IRS) collects the nanny taxes. They are summarized annually on the family (employer’s) Form 1040 Schedule H – an attachment to the family’s personal federal income tax return.
The nanny payroll taxes are added to the family’s personal income tax liability. Most families with full time staff will make quarterly payments of the nanny payroll taxes using 1040ES estimated tax payment coupons. This protects the family from substantial underpayment penalties at year end should the total family income tax + nanny payroll tax liability be too large.
Separately, the nanny employer is typically required to register for and make quarterly payments of state unemployment taxes. These unemployment taxes are paid to the state where the work is physically performed. Many states are moving to require online payroll reporting and unemployment tax payments.