Getting Past The Murky Waters Of Nanny Income Tax
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Getting Past The Murky Waters Of Nanny Income Tax
Hiring a nanny is nothing like hiring an occasional babysitter to watch your kids while you go out to dinner and a movie. At least it's not the same in terms of taxable wages. A babysitter who is called in from time to time is technically employed by you, but you're probably not paying them enough to contribute to Medicare, social security, or unemployment insurance. The plot thickens and becomes more complicated when it comes to deciphering nanny income tax.
If you're hiring a nanny for the first time, or if you've had someone on your nanny payroll, there are a few things you need to do in order to comply with federal nanny tax legislation:
1) Recognize that you don't have to be an accountant or a tax expert to figure this out. Your first resource should be the IRS when looking for information on nanny income tax legislation as it related to your state.
2) Claiming and submitting income tax deductions for your nanny might open doors to enable you to claim certain expenses like child care credits.
3) You'll need to report all household employment taxes with your 1040 and file Schedule H with your income tax return.
4) Use an online nanny tax calculator to help you figure out the deductions.
5) Seek input from an accountant if you're having difficulty. A qualified accountant can help you make the most of your tax returns, while complying with current nanny tax deductions.
The best idea is to seek professional guidance from an accountant based on your personal situation. A lot of things like the amount of nanny salary you pay, where you live, whether your nanny lives with you or not, and the types of tax credits you can apply for all affect the paperwork involved. The good news is that once you've figured out how to comply with federal nanny income tax regulations, the process should remain the same for you from year to year. The forms required might change, but once you've got it figured out, it should get a lot easier with time.
