[Updated] Nanny Payroll: Be in the Know
According to the U.S. Bureau of Labor Statistics, more than 1.3 million people work as nannies or child caregivers in the United States today. The Bureau also states that the median pay for these in-house employees comes to an estimated $9.28 per hour or $19,300 per year.
The reason that salary figure is important is because if you pay your nanny more than $2,000 a year, you'll need to report those wages to the IRS.
Also according to the U.S. Bureau of Labor Statistics, the number of childcare workers is expected to increase by 20 percent from 2010 to 2020 - faster than the average for all occupations. This growth is expected because of increases in the number of children who require childcare.
Nannies provide an invaluable service - that can't be denied. In most households both parents work and they work lots of hours at demanding jobs. It takes a village, as they say, and your nanny is an important part of that village. The trade off for having someone dependable that you can trust with your kids, is you take care of them as an employee just like any business owner might with their staff.
As you balance all of today's many financial concerns within a family - diapers, college savings, school supplies, new car, home maintenance, emergency savings, insurance, 401k - it's vital for families (i.e. employers) to budget and plan for nannies in an entirely different way compared to other household expenses, such as utilities, groceries, home and car payments.
Note that the maximum number of hours for a live-in nanny is five 12 hour days or 60 hours total in five days. A live-out nanny typically works less than 50 hours per week. At an estimated $10.00 or more per hour, the numbers really start to add up.
The nanny tax also calls for household employers to pay Social Security and Medicare taxes for all household workers who meet this wage test, and they must issue a W-2 form at the end of the year.
Regardless if you're a seasoned veteran to the nanny negotiations or a nanny newbie, being aware of the costs and requirements that come with being an in-home employer is pivotal. It can save you both in payroll costs, frustrations and fines.
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