Just realized something-may not need to pay tax afterschool person

[JustMe]

I think I have finally found an afterschool provider for the dcs. Its someone from the daycamp they went to and I am very excited as I know the camp director always hires great people. We talked some on the phone (I have already met her at camp), and it all seems good. She is coming over Sunday to talk a little more.

Assuming she starts, what do I need to do besides write her checks? I have never provided someone with a W-2 before. Is there a free/inexpensive program I can use or should be tracking things on.

Anything else someone who has never done this before should know?

I am feeling nervous about Sunday. I asked her most of what I need to ask and she said she doesn't have any further questions. I tend to be a little intense when it comes to the dcs. Should we just hang out and ask casual questions. There is some more info and a few more questions I want to ask, but nothing that would make or break hiriing her at this point.

Thanks for your patience!

[janeybwild]

Work out how much you are paying her annually (I believe it's >$1800/person) to see if it is an amount she and you will be required to declare. This explains it:

http://www.irs.gov/publications/p926/ar02.html#en_US_2012_publink100086732

If you do, then you'll need to get an employee identification number and pay state (for me it's quarterly) and federal unemployment taxes (annually). I do our nanny taxes myself using excel and Social Security site to generate a W2 (free). You can then claim this $ on your federal tax report as childcare expenses. Feel free to PM me. Good luck

[JustMe]

Yikes! I just looked at the publication linked and didn't realize it would be so complicated. I will be paying her more than $1800 year. I'm pming you.

[janeybwild]

It's a bit overwhelming in thinking about it, but it's really quite straightforward once you get it set up.

[ha98ed14]

No advice, but I just wanted to say Yay for you! I hope it goes well!

[JustMe]

Aargh! I read the link posted above as well as other publications and am really confused about one thing. If I am NOT going to pay her share of taxes, am I REQUIRED to withold them from her paycheck or can I just tell her she needs to pay them? There is info in this publication as well as others that confuses me about that. Please help!

[Philly Mom]

Could she be an independent contractor because you are only using her a few hours a day. If yes, you don't withhold, you just give her the IC tax form. If she was a full time nanny you would have to do the W2. Do you know any employment attorneys? They could tell you easily.

[JustMe]

Thanks for your reply. From what I have read on-line I cannot do the independent contractor thing. It is just unclear whether I actually have to do her withholding or not.

[nrp]

Not sure if you are confused on this point (so disregard if no!), but generally you do not withhold income taxes for household employees. You'll just give her a W-2 in January. For Medicare and SS, you have the choice of paying just your share or both shares. We pay both shares because there is a small tax benefit overall (the nanny doesn't have to pay income tax on the share of employment taxes you pay on her behalf). If you don't pay them for her, you will withhold them. From your nanny's perspective, she probably only cares about what is in her check and isn't going to appreciate whether you are withholding or paying on her behalf.

Then, as PP mentioned, your state will probably require you to pay unemployment taxes, annually or quarterly. You set that up separately (ours are online).

Disclaimer - I'm not a CPA, but this is what I've worked out myself.

[JustMe]

Not sure if you are confused on this point (so disregard if no!), but generally you do not withhold income taxes for household employees. You'll just give her a W-2 in January. For Medicare and SS, you have the choice of paying just your share or both shares. We pay both shares because there is a small tax benefit overall (the nanny doesn't have to pay income tax on the share of employment taxes you pay on her behalf). If you don't pay them for her, you will withhold them. From your nanny's perspective, she probably only cares about what is in her check and isn't going to appreciate whether you are withholding or paying on her behalf.

Then, as PP mentioned, your state will probably require you to pay unemployment taxes, annually or quarterly. You set that up separately (ours are online).

Disclaimer - I'm not a CPA, but this is what I've worked out myself.

Yes, thanks. This is what I am confused about and I think it is mostly about the Medicare and SS. I am not going to pay her share...I can't afford to; this is already more expensive than I thought. Do I need to withhold myself for Medicare and SS or just tell her she needs to do so?

[nrp]

Yes, thanks. This is what I am confused about and I think it is mostly about the Medicare and SS. I am not going to pay her share...I can't afford to; this is already more expensive than I thought. Do I need to withhold myself for Medicare and SS or just tell her she needs to do so?

You will withhold, because you are responsible for remitting payments on your return. If you have already negotiated her rate, just make sure before she starts that she understands that her check I'll be less than she might have expected.

[HannaAddict]

It is a complete PIA to be legit and I can't believe how much stupid paperwork is involved and how much our state DLI messes stuff up. As pricey as it is, I'd bite the bullet and use an online service like nanny tax or Breedlove. This from a once corporate securities attorney who set it up myself and wanted to pull my hair out!

ETA Sitters and nannies in your home cannot be independent contractors, the tax rules are very clear about this. You should make sure you and the nanny are on the same page for pay since her hourly rate will effectively drop once you take taxes out. We adjusted our nannies rate up a couple bucks an hour to help offset it. It is a royal pain and there are
Other rules about the tax credit to you for child care, don't assume you will get it.

[JustMe]

Wow! There is no way I can pay for a service like Breedlove--I had found them on-line just by trying to do research. Sigh. At this point, I am close to regretting going the nanny route. Its 10 hrs/wk and I had no idea this much came with it! It was going to be very close to what i would pay for the afterschool program (or so I thought)

[JustMe]

I just realized that I may not meet the qualifications for needing to pay at least for 2012! Somehow I was forgetting to only count until December! We will be under $1800 for that period! Now about the "quarters". I assume these start in Jan, meaning the quarters would be Jan-Mar, Apr-June, Jul-Sept, Oct-Dec? Can anyone tell me.

I may or may not meet criteria B related to the $1000 in one quarter depending upon what I decide to do regarding paying her for the weeks in Dec that I will have off and not need her.

Sigh. She starts Wednesday and I need to figure this all out.

[saleenl]

When we had a nanny, we used PayCycle which is now part of Intuit. It costs $20 per month but is well worth it and we were even able to pay our nanny via direct deposit, which was really nice!

https://www.paycycle.com/external/household/overview.jsp?name=left

It tells you how much to withhold and reminds you to send in payments - it even generates the tax forms. It was absolutely worth the $240 a year that it cost!

[HannaAddict]

Not legal advice, but you may not know exactly and assumed that you'd be under the limit for 2012 . . .

Is there a good after school program? Most people I know do not do taxes for 10 hr a week caregivers regardless of the $$$. Not saying its right, just what I've seen.

[niccig]

Most people I know do not do taxes for 10 hr a week caregivers regardless of the $$$. Not saying its right, just what I've seen.

:yeahthat: I know many people that have a sitter around 10 hours a week that don't pay taxes for them. I know it's not the right then to do, but I think the nightmare of paperwork you've described is why they don't. They do pay when it's more hours like a permanent part-time or full-time nanny.

[Kindra178]

We use a $100 software called www.nannypay.com. You still need to know your state's requirements, but it does print a pay stub and w2.

[squimp]

Our accountant did our nanny taxes for an additional about $30 per year. I just kept an excel spreadsheet. We did have to register as a business in the state, but it was all pretty reasonable and straightforward.

[JustMe]

Thanks so much everyone! I have been over this and over this for myself. I will be under the $1800 for 2012, so I think I will be okay on that part at least.