Paying the Nanny Tax Man
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Paying the Nanny Tax Man
If you employ a full or part-time nanny to work in your home, you're obligated to withhold and submit tax deductions from the nanny salary. It's one thing to hire an occasional babysitter, but if you're paying a wage for someone to work in your home, you're responsible for the tax deductions.
The nanny tax actually encompasses three other types of federal employment taxes including Social Security, Medicare, and federal unemployment. In addition, there are state unemployment taxes that need to be paid. Yes, it can be confusing, especially if you're not the “accountant type”. Luckily, there are lots of services available for people who want to correctly claim any taxes owing without risk of penalty. If you normally hire an accountant to do your annual taxes, there's no reason why you can't add this to the paper pile. On the other hand, if you've always managed to do your own taxes but suddenly aren't feeling too confident about doing the nanny taxes, it might be time to consider hiring an accountant.
The important thing is to be aware that nanny taxes are a must and there are no shortcuts. If you don't know what you're doing, hire a professional. Overtime, you'll start to accumulate more and more knowledge about the way nanny taxes work. As you become more comfortable with the idea, you may even decide to give it a try on your own. Remember, there's always help, all you have to do is ask.
