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To start the new year, I need to get organized. I was told I needed to get my nanny to fill out at W-4 form so that I can do the proper deductions and give her a W-2 for her taxes at the end of the year. My accountant has sent me a W-9 form instead. I know nothing about having employees at the house...so if anyone of you have a nanny, housekeeper or other staff working for you and do this...please illuminate me!
To start the new year, I need to get organized. I was told I needed to get my nanny to fill out at W-4 form so that I can do the proper deductions and give her a W-2 for her taxes at the end of the year. My accountant has sent me a W-9 form instead. I know nothing about having employees at the house...so if anyone of you have a nanny, housekeeper or other staff working for you and do this...please illuminate me!
I hope you have been paying unemployment taxes and SS for this nanny. If not don't expect her to give you her SS #. I had a big split with some folks I worked for when they expected me to give them my SS# so they could claim tax deduction but they refused to pay any of the items whichwould have benefitted me. This was several years ago so things might have changed. But just in case be forewarned.
To start the new year, I need to get organized. I was told I needed to get my nanny to fill out at W-4 form so that I can do the proper deductions and give her a W-2 for her taxes at the end of the year. My accountant has sent me a W-9 form instead. I know nothing about having employees at the house...so if anyone of you have a nanny, housekeeper or other staff working for you and do this...please illuminate me!
W-9 would be if you are treating her as a subcontractor. Then you would issue her a 1099 at the end of the year. Is that really kosher with nannying? I would think she needs to be an employee in which you need to pay her side of ss/medicare and the unemployment tax as already mentioned. You might want to really do a bit of research to make sure you are doing it right.
did you discuss with her when you hired her the issues of unemployment and SS and that you wanted the child care credit? This very scenario was called Nanny Gate when a prominent attorney in D.C. as up for some cabinet job and it was learned she hadn't paid into SS and unemployment taxes on the nanny and she lost out on what would have been a huge career boost.
Is this a real nanny that comes into your home or lives in your home and watches your children for long periods of time or is this an occasional babysitter? If this is a real nanny did you hire her directly or through a service? Is she technically employed by you or the service.
If she is a real nanny and watches your children many hours/day and has earned over $750 this year, you need to pay taxes/medicare and carry work-comp on her (at least in our state you would). If she is a 1099 employee, did you agree upon that at the start of her employment and to you dictate her schedeule? If you tell her when to come and how long to work, she can't be a 1099 employee.
W-9 would be if you are treating her as a subcontractor. Then you would issue her a 1099 at the end of the year. Is that really kosher with nannying? I would think she needs to be an employee in which you need to pay her side of ss/medicare and the unemployment tax as already mentioned. You might want to really do a bit of research to make sure you are doing it right.
A nanny cannot be an independent contractor as the employer 1) controls the hours that the nanny has to be at work, 2) controls how she is paid, and 3) likely gets benefits from the employer.
Facts that provide evidence of the degree of control and independence fall into three categories:
Behavioral (http://www.irs.gov/businesses/small/article/0,,id=179111,00.html - broken link): Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial (http://www.irs.gov/businesses/small/article/0,,id=179113,00.html - broken link): Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship (http://www.irs.gov/businesses/small/article/0,,id=179116,00.html - broken link): Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
This an area of abuse and one that the IRS is looking at pretty closely.
Whether she "agrees" to be an independent contractor is irrelevant. If she does not meet the many tests of the tax code, she is an employee.
Hire a service (nanny tax, etc..) - to take care of all the paperwork for you. Then at the end of the year, take their statement to your accountant/tax preparer.
We have had to hire home health aide (privately) for my parents - its the same deal. We pay Unemployment, Worker's Comp, SS and Medicare for the person. We do not do any witholding, as you do not HAVE to do that (only have to do that if the person requests you do it). As they will likely get a total refund (we pay all we can, but honestly - the person is still barely at poverty level) they don't care about witholding.
We pay a service (if you DM me, I'd be happy to provide the info) - all we do is provide the employee's SS# to them and they take care of calculating everything. They can even apply for your federal employer ID # for you, if you want them to.
However our normal tax preparer -- he has NOTHING to do with this. When I asked him if he'd want the business (instead of paying an internet service) he said "NO!". So, my guess is that a lot of tax accountants do not want to deal with your payroll issues, they prefer to let the payroll people deal with that.
And - as everyone else was saying, if this person truly is your nanny - you are responsible for all employee related items (SS, Medicare, State Unemployment, State Worker's Comp, Federal Unemployment). If this person works for a different agency, then you are not responsible for anything (you're paying the agency) as the agency should be taking care of taxes, etc..
Good luck, and DM me if you need any recommendations for a payroll/nanny tax service. I've been happy with the one we're using, and its one less thing I have to take care of.
We hired an accountant to help with nanny taxes. It's not that complicated. Nanny must complete the W4 (and I-9). You need to get an EIN (you can apply online I believe). We withhold state taxes and FICA from the nanny's pay. Every quarter our accountant prepares forms to file state taxes (unemployment security commission AND state withholding). At the end of the year, our accountant prepares a W-2 for our nanny and prepares a W3 for us (to be sent to Social Security Administration). Our accountant charges $75 a year to prepare these forms for us (I think they don't charge much because we also use them to prepare annual income tax). Not sure -- but I imagine this may be cheaper than hiring a "nanny tax service". (Honestly, I think I could do it myself now that I've seen how it's done--it's not rocket science.)
(BTW you definitely don't want to issue a 1099 for a nanny working in your home--the IRS doesn't look too kindly on that)
Last edited by adobe1234; 01-15-2011 at 09:35 PM..
Reason: forgot to mention EIN
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