The Payroll Blog
News, tips, and advice for small business owners
If you require assistance caring for your child in your own home, hiring a nanny may be the best decision you can make. While this sounds like a good idea, you don’t want to take action until you answer a few key questions:
Just the same as any employer-employee relationship, you will negotiate with your nanny to reach a mutually acceptable payment agreement.
Once you determine how much the person will be paid, it is time to settle on a payment schedule. Will you provide payment once a week? Twice a month? Once a month? Again, this is open for discussion and negotiation.
The act of choosing a payment method can be challenging. Not only do you want to do what is best for you and your nanny, but you must consider how to stay organized. Furthermore, and just as important, are the tax implications.
The easiest and most efficient way to pay your nanny is through a payroll company. There are many reasons for this:
As somebody who employs a nanny, either on a full-time or part-time basis, you are required to pay the "nanny tax." Employers are required to withhold 1.45% of Medicare taxes and 6.2% of Social Security. The only exception is if you pay less than $2,000 in cash wages.
Employers are also required to pay the employer portion of Medicare and Social Security, which is 7.65% for 2015.
Note: you are not obligated by law to withhold federal income tax. If your nanny requests that you do so, be sure to have Form W-4 on file.
Generally speaking, how you pay your nanny is up to you and the person who will be performing the work. Just make sure you understand your obligations as an employer, such as the tax regulations set by the IRS and your state.