The Payroll Blog

News, tips, and advice for small business owners

Understanding Nanny Unemployment Taxes

Posted On
Stephanie Davis

Good news: If you’ve figured out that you owe nanny taxes and you have your Social Security and Medicare nanny taxes squared away, you’re almost done collecting the nanny taxes you need to send off to Uncle Sam. As we have mentioned before, the nanny tax is comprised of multiple taxes. We’ve previously talked about Social Security and Medicare taxes, and now we are going to break down the Federal Unemployment Tax Act (FUTA).

nanny payroll part 3 - smiling baby

What is the FUTA tax?

The FUTA tax refers to the taxes employers are required to pay the federal government to cover employees who qualify for unemployment benefits. Note that this only applies to full-time employees, As a household employer this is something you need to be aware of when paying your nanny or other household employees.

When do you pay the FUTA tax?

If your household employee(s) make more than $1,000 or more in any quarter, you are responsible for paying the FUTA tax. Similar to Social Security and Medicare taxes, the IRS grants a few exceptions. You will not have to pay the FUTA tax if your nanny or household employee is:

  • One of your parents
  • Your spouse
  • One of your children under 21

FUTA is only collected on your household employee’s first $7,000 of wages. The FUTA tax rate is 6 percent, although many employers get a 5.4 percent credit against the FUTA tax if they pay their SUTA (State Unemployment Tax Act) tax in a timely manner.

Additionally, FUTA is paid quarterly when payments are $500 or more. The quarterly payment dates to keep in mind are:

  • April 30th
  • July 31st
  • October 31st
  • January 31st

How to file the FUTA tax

The IRS gives two options for paying and filing FUTA: If you or your spouse don't own a business, you'll include a Schedule H with your annual personal income tax returns. If you or your spouse own a business, you can add your household employee’s FUTA taxes to one of the following tax forms:

  • Form 941 – Employer's Quarterly Federal Tax Return
  • Form 944 – Employer's Annual Federal Tax Return

Whether you fill out Form 941 or Form 944, you'll also add your nanny to Form 940, Employer's Annual Federal Unemployment (FUTA) tax return. Each form will include instructions about where and when to send payments.

Do you need more help?

FUTA taxes have a lot of information. If you still need more guidance with those check out our blog post featuring the 10 things to know about FUTA. Being a household employer can be complicated with all of the various tax rules to follow. When it comes to accurately paying your household employee(s), a mistake can wind up costing you big. For this reason, some people choose to outsource nanny payroll and let a professional handle it. At SurePayroll, we can help you with all of your household employee needs and get you up and running in no time. With more time for your family fun, and less time worrying about payroll, we will ensure that your taxes are paid and filed every time*. Did you know that we have been rated the Best Household Payroll service for three years running by Business News Daily? Ready to get started?

*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.