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Do the Nanny Tax Rules Ever Change?


Once you realize the benefits of hiring a nanny, there is a good chance this person will continue to work for you well into the future. From day one, you must become familiar with the nanny tax, including what you are responsible for paying. Neglecting to understand your responsibilities can land you in trouble with the IRS, thus leading to a large tax bill at some point in the future.

Nanny tax rules can and have changed in the past. For example, prior to 1997, a household employer did not require a Federal Employer Identification Number. Once this was changed, every household employer was required to register for an identification number with the IRS.

Here is a change that is made often: the earnings threshold. As of 2016, you have to pay FICA taxes for a nanny if he or she earns more than $2,000. This number is likely to increase again in the future, just as it has in the past. For example, the earnings threshold in 2010 was $1,700.

What about the amount of FICA taxes required to be withheld on behalf of the employee, and paid by the employer? This number could change in the future, however, it has held steady over the years. Currently, a household employer is required to withhold 6.2% of income for Social Security and 1.45% for Medicare taxes. This is the nanny's portion of the tax. The employer must also pay 7.65%, for a total of 15.3% of gross pay.

Stay Current with Changes

It is a must to stay current with nanny tax rules, including any changes that could impact how much money you withhold or how much you pay. Your payroll company or accountant can advise you on any changes, as well as what you can do to avoid trouble with the IRS and other tax agencies.