Posts Tagged ‘help with nanny taxes’
Help! I’m a Nanny and Didn’t Get a W-2
At this time of the year we often hear from nannies with questions about taxes. If you are a nanny and haven’t received a W-2 from your employer, here are a few things you can do:
1. Ask the family if they’ve prepared your W-2 and when you can expect it. It’s entirely possible that the family got busy and completely forgot to prepare your W-2, or they didn’t realize the deadline was January 31. Also, if you recently moved and didn’t update the family with your new address, they could have mailed it to the wrong place.
2. If you discover the family isn’t going to provide a Form W-2 because they didn’t withhold or pay taxes last year, remind them that failing to handle the “nanny tax” obligations is extremely risky (felony tax evasion with expensive penalties) and denies you several important benefits. They may think that nanny taxes will be very expensive, so it’s worth letting them know that tax breaks for childcare expenses can offset most – if not all – of their employer tax costs.
3. Don’t accept a Form 1099 from the family in place of a W-2. This form is for independent contractors only. This is important to you financially because independent contractors have to pay the entire FICA tax liability (15.3%) whereas employees only have to pay half (7.65%). For a caregiver making $30,000 per year, that’s a difference of $2,295! It not only hurts your pocketbook, it’s also risky for the family. The IRS has ruled definitively that nannies should be classified as employees and families that misclassify their employee as an independent contractor are subject to tax evasion charges.
4. If the family simply refuses to give you a W-2 prior to the April 18 tax reporting deadline, you’ll be forced to file Form 4852, which is the substitute for Form W-2. Filing this form can trigger an audit for the family, but as a last resort, it’s the only way to legally report your income to the IRS. The form and instructions for filing it are available here.
Thank you Regardingnannies.com and Stephanie Breedlove for sharing this helpful information.
What Happens If I Don’t Pay Nanny Taxes?
“Not paying your nanny taxes may seem like an easy way to save some money and not have to deal with the hassles of calculating and remitting taxes. Plus, if you don’t pay nanny taxes, how is 
anyone going to find out? Your nanny is on board as she gets a few extra dollars in her paycheck. You’re not running for political office or being nominated for a position in government. And those are only the people who get caught not paying nanny taxes, right?
Wrong.
There are a number of ways to easily get caught if you don’t pay nanny taxes. Most will end up with you paying much more in fines and penalties than in the actual tax responsibility you chose to ignore.”
Our friends at GTM Payroll Services have laid it all our for you, and what can happen if you avoid Nanny Taxes.
Federal Reporting Thresholds for Household Employers
Tax information for employers and nannies is being updated for the new year. Thanks to our friends at HomePay for this valuable information all nannies and employers should know. 
The earnings threshold that triggers the requirement to remit FICA taxes on a household employee’s wages will increase from $2,400 in 2022 to $2,600 in 2023. If the annual FICA wage threshold is reached, the employer becomes responsible for remitting both the employee and employer portions of FICA on all the wages they paid to the employee during the tax year. When wages paid to a household employee do not reach the annual FICA threshold, the employer is not required to issue a W-2.
A new line has been added to form 1040 (federal personal income tax return) for reporting income earned as a household employee that was not reported on form W-2 because the wages stayed below the FICA threshold. It is no coincidence that the IRS added this new line alongside the change to the threshold triggering the requirement for TPSOs like Venmo and PayPal to file and issue a 1099-K.*
*Previously, the 1099-K threshold had been $20,000 and 200+ transactions received. Effective 1/1/23, the threshold will be $600 in payments received.
1099-K Threshold Changes Postponed
This past Friday, December 23rd, the IRS announced that the effective date of the new 1099-K threshold will be pushed back a year. So, rather than impacting payments made after 1/1/22, the change will impact payments made after 1/1/23. Per the IRS announcement, the delay is intended to provide more time for taxpayers to prepare and understand the new reporting requirements.
While changes to the 1099-K requirements do not impact payments made through a payroll service, we know that TPSOs like Venmo, PayPal and Stripe are frequently used by families to pay date night sitters and other more temporary/adhoc providers. Earlier this year, we shared answers to FAQs we received when the change was first announced. As of now, the answers are still accurate – minus the effective date of the change. We will continue to compile resources to help families and domestic workers ensure that they have their ducks in a row for the 2023 tax filing season.
Should you have any questions, give us a call or reach out to HomePay for all your nanny tax and payroll needs.
The professionals at TLC Family Care personally assist nannies, babysitters and families in St. Louis, Atlanta, Chicago, Nashville, Memphis, Charlotte, Miami and Orlando to find the right childcare arrangement. Our mission is to provide a safe and personalized approach for families and caregivers to connect with each other that is not an internet search. TLC has worked with families, nannies, sitters, newborn care providers, and tutors for over 35 years and looks forward to working with you! To find great nanny and babysitting jobs visit us at tlc@tlcforkids.com or Call 314-725-5660.
Understanding Nanny Taxes
Tax season has started and many of you are working on filing your taxes. TLC for Kids has received a few calls today about how to handle nanny taxes. We are not tax experts, so we recommend using Breedlove and Associates for all your household employment needs. Here is some information from Breedlove on nanny taxes.
Paying taxes tends to invoke negative feelings for most people. Fortunately for household employers, there’s a silver lining– tax breaks. As long as you and your spouse are working or are a full-time student and have at least one child under 13, you’re in a great position to make back most, if not all, of your nanny taxes. Here are two ways you can save:
1) Dependent Care Flexible Spending Account. Many companies offer their employees the option to set aside up to $5,000 of their pre-tax earnings into a Dependent Care Account to pay for childcare expenses. This means there is no federal or state income tax, Social Security tax or Medicare tax on $5,000 of either you or your spouse’s income. Depending on your state and your tax bracket, this deduction will save you anywhere from $2,000 to $2,300 per year.
2) Child Care Tax Credit. If you don’t have access to a Dependent Care Account, you can claim the Tax Credit for Child or Dependent Care (IRS Form 2441) on your federal income tax return at year end. If you have one child, you can save up to $600 per year (20% on up to $3,000 in childcare expenses). If you have two or more children, your savings will be up to $1,200 per year (20% on up to $6,000 in childcare expenses).
Great News! If you have two or more children under the age of 13, you can use a combination of these two tax breaks in order to achieve a maximum of $2,500 in tax savings.
For many families, the tax breaks will offset a large portion of the employer tax costs. This is especially true for those employing someone on a part-time, seasonal or NannyShare basis.
We hope you find this helpful. Please call TLC for Kids St. Louis 314-725-5660 or TLC for Kids Miami 305-256-5905 for your child care needs.