Help with the nanny tax (unemployment, income, income tax)

[RunMama]

Hi everyone - I'm about to hire a nanny to watch my child in my home. I have been reading through the IRS website to figure out how to calculate the nanny tax, but I'm confused.

I know that 13.3% goes toward Social Security and Medicate (5.65 from me and 7.65 from the employee's pay). I think I also have to pay .8% for federal unemployment on the first 7k of the nanny's pay. Does GA require a state unemployment tax?

Do I just deduct the money I owe so I have it set aside come tax day? I'd rather take care of this myself than pay even more to have a company handle it. HELP!

I've applied for an EIN already, but that's as far as I've gone.

[Nast]

We had a nanny for four years, and the taxes can get to be a headache if you don't stay on top of them. In addition to the EIN you will also need to get in touch with the Georgia Dept. of Labor to set you up with a Georgia Employer ID so that you can begin paying GA unemployment on top of FUTA. You can pay this quarterly, and it really doesn't cost that much more (I believe it's about $200/year), just make sure you make the payments on time, as penalties and interest can add up quickly (we learned this the hard way).

You can pay your portion of the medicare and social security payments with your annual income taxes, but keep in mind that while the amount may seem small at first glance (and you might want to double check - I thought employer contribution was closer to 7%), when you're paying it as a lump sum on top of whatever else you are paying on your own income taxes, the additional amount can be quite a shock. We compensated for this by having an additional amount of taxes withheld from my own work paycheck, so that it was paid over the course of the year.

Also, depending on your agreement, your nanny may request that you do withholding on her behalf. This means that you would have to file an initial withholding statement with the IRS, then each quarter send in payments to both the IRS and the GA Dept of Revenue that match the amount you withheld on her behalf. Each year around tax time you would have to send a W3 statement stating the amount you paid her and the amount she withheld, as well as make a W2 statement for your nanny so that she can file her taxes. Of course, you can always agree to not do withholding, but there are pluses and minuses to you managing it rather than her.

It seems like an awful lot to do, but once you get the hang of it, it's really not that bad. I just ended up creating a spreadsheet and updating it once a month or so, and you get used to it. Let me know if you have any other questions and good luck!

[plankton97]

+1 to Nast. You also have to report your nanny to the Georgia New Hire Reporting Program within (I think) 3 or 5 days of hiring them. It's easy to do through their website, but you do need your employer ID and employee SSNs. I found that the federal taxes were *much* easier to deal with than the state ones, you just pay all the federal taxes when you file your return. I agree that it seems like a lot to do initially, but keep good records and it gets easier over time.

[RunMama]

thank you so much! i've spent hours trying to figure this out. i really appreciate the response