The Payroll Blog

News, tips, and advice for small business owners

Do You Owe the Nanny Tax?

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Stephanie Davis

Being a parent is hard work. From juggling multiple schedules, to managing a work / life balance, there is a good chance that from time to time you’re going to need a little extra help in your life. When looking to hire a nanny or household employee, you will have to make sure that this new employee is paid accurately. Often times, people believe these household employees can be paid under the table, which essentially means paying cash to avoid taxes. However, when it comes to household employees, it’s important that you’re paying the nanny tax.

nanny payroll part 1 - two parents looking over tax bills

What is the nanny tax?

In short, the nanny tax refers to the taxes you are obligated to pay as a household employer. When hiring a household employee, you are responsible for deducting Social Security, Medicare, unemployment and state taxes from an employee’s paycheck. These taxes are also commonly called “payroll tax” but since this is for nanny payroll it gets the name of the nanny tax. Neglecting to pay these taxes can lead to hefty fines.  

Criteria for paying the nanny tax

Now that we’ve covered what the nanny tax is, you’re probably wondering if it’s something you actually have to pay. According to IRS Publication 926, you're exempt from paying the nanny tax and the Federal Unemployment Tax Act (FUTA) in 2019 if your nanny is a:

  • Parent
  • Spouse
  • Child under 21

You also don't owe the nanny tax if your nanny is under age 18 at any point during 2019. Unfortunately, that rule doesn't apply to FUTA.

So, when do you owe the nanny tax?

  • If you pay your nanny $2,100 or more in 2019 and she or he doesn't meet any of the exemptions
  • If your nanny earns $1,000 or more in any calendar quarter in 2019 and doesn't qualify for any of these exemptions, you're responsible for FUTA payments and paperwork. (Remember, the "under 18" rule doesn't apply to FUTA.)

If you meet the above criteria, the IRS considers you a household employer, which means you are responsible for accurately paying this employee.

Need more help?

If you’re hiring a household employee, there’s a good chance it’s because you are already busy and need some extra hands around. If that’s the case, managing payroll on your own, which we are assuming isn’t an area you’re well versed in, is just another lengthy item on your to-do list. Searching for nanny payroll services can make this task a little less painful. When you choose to get help with nanny payroll, all of your taxes will be taken care of and you don’t have to worry about getting in trouble with the IRS.

When choosing SurePayroll to manage your nanny payroll, you get the peace of mind knowing that your taxes are going to be paid and filed accurately, which is all backed by our taxes paid and filed guarantee*. With our mobile app, you can process payroll for your nanny on the go right from the palm of your hand. Additionally, we have been voted Best Household Payroll Service for three years in a row by Business News Daily.

*If you receive a notice from the IRS, or any other tax agency, based on a filing that SurePayroll made, we’ll work with the agency to help resolve the issue on your behalf.  And, if we’re at fault, we’ll pay all the associated penalties and fines.

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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.