(State Dependent) State Unemployment Tax (SUTA) Unlike Social Security and Medicare, FUTA is entirely employer paid and is not withheld from your nanny’s paycheck. Exceptions are if your nanny is your spouse, your child under the age of 21, or your parent. Required if you pay cash wages of $1,000 or more in any calendar quarter of 2022 or 2021 to your nanny.
Some exceptions apply if your nanny is your spouse, your child under the age of 21, your parent, or under the age of 18 in those cases, see the Federal Household Employer Guide.
Required if you pay your nanny cash wages of $2,400 or more in 2022 (up from $2,300 in 2021). See below to learn who each of these items apply to, and why you and your nanny should care. Parents should also ensure that their nanny contract addresses the requirements.The ‘nanny tax’ is a collection of taxes you are required by law to pay if you meet the criteria. State law differ on these matters and may or man not apply to nannies.įor additional assistance, parents should contact their state department of labor and/or work with a nanny payroll company or employment attorney. Parents are responsible for paying 100% of their nanny’s federal unemployment tax (known as FUTA) and any required state unemployment taxes and insurance. Parents may also be responsible for paying workers’ compensation insurance, which provides coverage for employees for injuries caused by or related to their employment. Parents will still pay the IRS the required $1.33. Using the example above, the nanny will be paid $9.44 for an hour of work ($10 – $.565). Option 2: Parents withhold the nanny’s share of FICA taxes from the nanny’s wages and use the money withheld to make the required tax payments.Thus, the total FICA taxes on one hour of the nanny’s work is $1.33, which the parents will pay in its entirety from their own funds. For example, if a nanny’s wages are $10 per hour, the nanny’s share of FICA taxes is $0.565 (5.65% X $10) on one hour of work, and the parents’ share as the employer is $0.765 (7.65% X $10). Thus, parents will not withhold FICA taxes from the nanny’s wages and will pay the nanny’s share from parents’ own funds. Option 1: Parents pay both their own share as well as the nanny’s share of FICA taxes.Parents are responsible for paying the IRS both their own share as well as the nanny’s share. For 2011, a nanny’s share of FICA taxes is 5.65% of his or her wages, and parents have a matching employer share of 7.65%. Usually, parents and a nanny each owe FICA taxes. Social Security and Medicare taxes are known together as FICA taxes. IRS Form W-4 can be downloaded at irs.gov, and the state form should be available at the website of the state taxing or revenue agency. If parents do withhold taxes, the nanny should complete IRS Form W-4 and the equivalent state form (for states that have income taxes) for the calculation of the proper amount of money to be withheld. Nevertheless, some parents do so as a courtesy. Under federal and state law, parents are not required to withhold money from their nanny’s wages for payment of federal and state income taxes.
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