What Are My Nanny Tax Requirements? For Household Employers
GTM Payroll Services' Founder & CEO, Guy Maddalone, discusses "What Are My Nanny Tax Requirements? For Household Employers" with GTM Corporate Services' Manager, Stephanie Carpenter.
GTM Payroll Services Inc.
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(Guy) Welcome to our Educational Video Series.
(Guy) Today's topic is for Household Employers.
(Guy) "What are my Nanny Tax Requirements?"
(Guy) With me is GTM Corporate Services Manager and FPC, Stephanie Carpenter.
(Guy) Well, as a household employer, there are certain tax responsibilities you want to be aware of.
(Guy) The first one is the Social Security, or known as OASDI.
(Guy) It's 6.2% of the employee's gross wages.
(Guy) The next tax is the Medicare tax, which is 1.45% of the employee's gross wages.
(Guy) Then the Federal Unemployment which is 0.8% of the first $7,000 in a calendar year of the employee's gross wages; and then State Unemployment Taxes, which varies from 1% to 5%.
(Guy) Based on a certain dollar amount in a calendar year, based on the employees or the state that you're employing somebody in.
(Guy) Now, as an example, we went to GTM.com, used the free Nanny Tax Calculator, and said that we were a family who is going to pay a nanny working in New York, and we are going to pay her $500 in gross wages.
(Guy) So, we wanted to find out what the employer's taxes were going to be.
(Guy) So, you can see on this example here on your screen.
(Guy) In the orange bar, it says "Employer Taxes".
(Guy) The Federal Unemployment, in addition to the $500 of gross wages would be $4 per week.
(Guy) The Social Security would be $31 a week; the Medicare, $7.25.
(Guy) And then the New York State Unemployment would be $20.50.
(Guy) Those four taxes would add up to $62.75.
(Guy) If we take the $62.75 and add it to the $500 of gross wages then my total out-of-pocket cost, or my employer responsibility, is going to be $562.75.
(Guy) Now, be aware that it may actually cost you a little bit less if you can qualify with your Dependent Care Assistance Plan (DCAP) at work, or use the Child & Dependent Care Tax Credit.
(Guy) Please call us at GTM for a little bit more information about that.
(Guy) Now Stephanie's going to talk to us about the nanny withholding taxes.
(Stephanie) Now as a nanny, there are four taxes that you are liable for as well: OASDI or Social Security is 4.2%, and that's effective 2011.
(Stephanie) Medicare at 1.45%.
(Stephanie) Now, Federal and State Income Taxes. The calculation is based on gross wages, pay frequency and withholding status. But both Federal and State Income Taxes are not required to be withheld.
(Stephanie) Now, here is an example of a breakdown of a nanny who works in New York, also is paid $500 gross wages and claims single zero.
(Stephanie) Now you can see her gross wage is $500, the federal is $60.77, social security is $21, Medicare at $7.25, and state income tax at $16.47. (Stephanie) This would leave the employee with a net take home pay of $394.51.
(Stephanie) Other thresholds for paying taxes: Social Security and Medicare taxes.
(Stephanie) If you pay any household employees $1,700 gross or more in 2011, you are required to withhold and pay OASDI.
(Stephanie) Federal Unemployment Tax: If you pay total cash wages of $1,000 gross or more in any calendar quarter in 2011, you are required to pay the FUTA tax.
(Stephanie) State Unemployment Tax. States can vary, but there may be a requirement for State Unemployment Tax as well.