When you hire a nanny, either temporarily or on a permanent basis, she is always your household's employee. She is not an independent contractor. This is determined by the nature of work she performs, not by the amount of money she is paid or the amount of time she works for you.
You are not required to pay Social Security and Medicare unless you pay your nanny over $2000 in a calendar year (2017 figures). Unemployment insurance is paid when you pay a nanny over $1000 a fiscal quarter. Nannies are responsible for paying federal and state income taxes on all wages earned in a calendar year.
Your household employment taxes will be approximately 10% - 12% of your employee's gross earnings. In addition, if you reside in Washington state you may also need to pay Worker's Compensation insurance. These taxes are in addition to your employee's salary. Here is how they break down:
- Social Security
- Federal Unemployment Insurance
- State Unemployment Insurance
- State Special Payroll Tax
- Washington State Worker's Compensation Insurance
Your local IRS and State Department of Revenue offices can provide all of the forms you need to get started as a household employee. For further information please contact an expert household employment tax authority like Homework Solutions.
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