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Nanny Taxes and What You Need to Known

Paying your nanny or domestic household staff on the books does not have to seem like a daunting task. There is plenty of help available. First, let’s remember paying your staff on the books is required by law. The IRS requires anyone who has hired household help: a nanny, chef, housekeeper, estate manager, senior caregiver, etc… to pay taxes. If you pay a candidate more than $2300 in a year (in 2021), you are required to pay Social Security and Medicare.

Aside from complying with the law, you will have benefits:

  • One is the option to take advantage of tax savings through your employer’s Flexible Spending Account (FSA) and/or the Child and Dependent Care Tax Credit. This could save you thousands of dollars in annual taxes.

  • Parents will have peace of mind as you will not be concerned with fines, violations, penalties, lawsuits or audits.

A few benefits to paying your candidate on the books: She will have a verifiable income and legitimate employment history. This is helpful in applying for credit, a loan, mortgage etc… If unforeseen events happen and you need to lay her off, she will be able to file for unemployment. Also, your caretaker will be thankful for the benefits and safeties of being paid legally such as Social Security and Medicare.

We find it best to get your nanny taxes organized though a company that is experienced in handling taxes for domestic staffing such as GTM or Homepay Payroll Services. This way you will be guided properly and will avoid any sort of tax violations.

Disclaimer: Tiny Treasures Nanny & Household Staffing Agency is providing information for general use only and does not represent personal tax advice, nanny taxes or any other type of taxes either expressed or implied. Laws change, and it is necessary to seek the guidance of a professional tax service provider.


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