Today TaxMama hears from Tom, who’d like to know. “Can you point my wife and me to any basic resource for information on tests to determine whether one needs to do withholding or taxes in general for nanny services? And, then, how to actually execute the necessary record keeping and filings.”
Ahh…I just found a free Calculator
OK, here we go: IRS Publication 926
It will tell you at what quarterly/annual income level you become responsible for dealing with payroll taxes.
Also, consider reading the instructions to Schedule H – I found them quite informative when we had to file for clients.
https://www.irs.gov/pub/irs-pdf/f1040sh.pdf – Form
https://www.irs.gov/pub/irs-pdf/i1040sh.pdf – Instructions
As to execution, are you any good at doing payroll? If not, I urge you to get a payroll service.
Here’s IRS’s list of providers
https://www.paycycle.com/external/business/resources.jsp PayCycle charges about $300/year, less the first year)
Or use a Nanny tax service. They tend to charge about $400 or so per year – but are apt to give you more customized help and advice
In fact, consider talking to Kathy Webb at 4nannytaxes – she struck me as having a good grasp of the issues.
I hope that helps?
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- Ask TaxMama :: Where taxes are fun and answers are free
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- IRS Publication 926 :: Household Employees Publication
- IRS Schedule H :: Household Employees Form
- IRS Schedule H :: Household Employees Form Instructions
- 4NannyTaxes.com :: Nanny Payroll Service
- NannyTax.com :: Nanny Payroll Service