Nanny taxes

The nanny taxes is a tax that is implied on the individuals who hire people for their services. The jobs basically comprises of household tasks. The term nanny taxes originated from the people who take care of children in absence of their parents. Earlier very few could afford a nanny and is considered as a practice for high income group. Recently, nanny tax evokes fear and loathing among the people who hire workers for in-home service. If people hire someone to trim their home turf or to take care of their children, then those need to know about the nanny tax. The nanny taxes is the federal requirement that people should pay the employment taxes on household employees. In the mid -1990s, congress took at the nanny tax, suspecting that many employers in the United States only 500,000 had paid the required taxes.

Nanny payroll taxes - Obligation

House hold works are done by the nannies for baby sitting, health aides, private nurses, house cleaners, caretakers, house cleaners, yard workers and other domestic works in the house. To get the correct nanny taxes of the workers the person needs to follow certain obligations. There are some important obligations regarding nanny payroll taxes.

  • Social security: 6.2% is withheld from the employee and matched for people up to $90, 000 in 2005 and $94, 200 in 2006. These taxes, mandated by the federal insurance contribution act, and know as FICA on their payroll check, provide for federal system of old age, survivors and disability insurance for workers and their families.
  • Medicare: 1. 45% is withheld from the employee and matched for people with no limit in wages. These taxes pay for hospital insurance when they reach to age 65.
  • Federal unemployment taxes: people pay 6.2% on the first $7,000 in wages, but this amount is reduced by a credit of 5.4%, resulting in a net tax of 0.8% if they paid all their required state unemployment taxes.
  • State unemployment and disability taxes: people are responsible for the payment of both, their share and their employee's share. People need to pay these taxes to their household employees. Household work is done in and around individual s home by nannies, babysitters, health aides, private nurses, house cleaners, caretakers, yard workers and similar domestic workers.

    • Management of nanny taxes

    Nanny taxes are quite simple if they are handled carefully. A person needs to know for what services they would add up to the nanny taxes. Paying nanny taxes is not bad at all if the person is an employer. Approximate payments to domestic employers includes person who clean the house. This might get the person to qualify for the child care credit. If the person is qualified for the child care credit then a person can save as much as 300 dollars. This can be much more than the nanny taxes that a person can pay. So, paying nanny taxes is not bad at all.

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