Household Employer Taxes (aka the Nanny Tax): What You Need to Know
Paying household employees — like nannies — by cash or personal check could cost you thousands of dollars in fines and penalties. Read our guide for tips to save you time, money and stress.
If your home life hums along with the support of nannies, babysitters, housekeepers, gardeners, or others who keep things running smoothly, you might be considered a household employer. That distinction comes with important payroll and tax responsibilities.
The 2023 Household Employer Tax Guide, offers tips to save you time, money and stress, including:
- who qualifies as a household employee
- how to calculate household employer tax (aka, the nanny tax)
- tax credits available to household employers
- tax forms household employers need
- how a payroll service like SurePayroll can help you keep your household running smoothly
Are You a Household Employer?
You’re busy. You juggle commitments and crazy schedules. You could use some help. Maybe a nanny to care for your baby as you return to work, a tutor to help your child, or a caregiver to assist with an elderly family member. If you pay the worker directly and control the work they do in your home, the IRS considers them a household employee
Household employers are typically responsible for paying and withholding Social Security, Medicare and/or federal unemployment tax, depending on the employee’s income (see our guide for specifics). This is often referred to as nanny taxes.
Do I Have to Pay Nanny Taxes?
While it may be convenient, it’s illegal and often costly to pay household employees by cash or personal check. Failing to pay household employer taxes can cost you up to $25,000 in fines and penalties.
Legally paying taxes for nanny and other household employees offers benefits for everyone, including:
- avoiding costly fines and penalties
- protecting you as an employer
- making you eligible for tax credits
- ensuring household employees can collect Social Security and Medicare when they retire
- providing household employees with proof of employment
The IRS does make a few exceptions to household employer taxes, which are outlined in IRS Publication 926. You are usually exempt from paying the nanny tax if your household employee is a parent, spouse or child under 21.
Household employers must also meet state-specific requirements including adhering to state-mandated family medical leave programs and carrying worker’s compensation insurance.
Read our guide for an overview to help you determine if household employer tax applies to you.
What’s the Best Way to Pay Household Employee Taxes?
Every household is different.
Many people try the do-it-yourself method first, only to discover the details are quite time-consuming. Those details include gathering the many necessary tax forms and sending in payments to the various tax agencies on time.
The fact is you hired a nanny, caregiver, tutor, housekeeper or other household employee to give you a break. Running payroll now adds a new task to your to-do list.
That’s where SurePayroll can help.
Whether you’re paying one household employee or more, you deserve a partner who understands your needs and can simplify the complex. We help families manage household employee pay, calculate taxes, and stay compliant with federal and local tax rules.
Families appreciate how SurePayroll supports them in keeping their household running smoothly and taking care of the people who help, including:
- Run payroll online anytime, from anywhere
- Save time by setting up your payroll to run automatically
- Direct deposit and online paystubs for your employees
- Automatically track sick and paid time off every time you run payroll
- Support from a U.S.-based customer care team available in the ways that best meet your needs: phone, chat or email
- Access to a complete set of online resources for guidance on common topics
- Connection to our online workers’ compensation marketplace for customized quotes
The SurePayroll tax service guarantee means:
- Federal, state and local payroll taxes automatically paid and filed for you
- 1040-ES automatically filed on your behalf
- Signature-ready Schedule H to attach to your annual 1040 form
With SurePayroll in your corner, you’ll save the time and hassle of managing the pesky details of household payroll taxes.
* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.
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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.