| After attending an APNA (Alliance of Professional | | | | In addition, there are State and Federal Income taxes |
| Nanny Agencies) conference in beautiful Destin, Florida, | | | | that may or may not be withheld depending on the |
| it became apparent to me that Household payroll | | | | agreement between you and the employee. If you do |
| taxes are becoming more of a talked-about issue. | | | | withhold these taxes, you need to refer to your state's |
| Although most people who hire household staff would | | | | withholding guidelines. |
| still prefer not being troubled by the nuisance of figuring | | | | You will also need to pay Federal and State |
| out the taxes and paying the extra amounts | | | | Unemployment Tax. What are the advantages to |
| necessary to hire an employee, there are a number of | | | | doing payroll taxes on my employee aside from the |
| converts who understand the importance of doing so. | | | | fact that it is a legal requirement by law? |
| If you are a household employer who is still unsure | | | | There are a few advantages to doing the right thing. |
| about the process, consider the following: | | | | First of all, you can pay your employee with pre-tax |
| What is a Household Employer? A household | | | | funds through a Dependent Care Assistance Plan |
| employer is defined as someone who pays an | | | | (DCAP) that is a tax-exempt fund that your employer |
| individual $1,500 or more in a calendar quarter to | | | | would offer as a benefit. This plan allows you to |
| perform duties in or around their home on a regular | | | | contribute up to $5,000 of your pre-tax earnings to an |
| basis. | | | | individual Dependent Care Account. The money in this |
| An example of a household employee would be a | | | | account is then used to cover dependent care |
| Nanny, Housekeeper, Cook, Home Health Aide and a | | | | expenses free of taxes. |
| Private Nurse, to name a few. The other important | | | | For those who do not have access to a Dependent |
| issue is how much control you as the employer have | | | | Care Account, you may claim a tax credit for Child or |
| over the employee from a management standpoint. | | | | Dependent Care on your income tax return at the end |
| For example: if you determine the work hours, where | | | | of the year. |
| the employee works and their responsibilities, you | | | | You can take a tax credit of 20% to 35% of qualifying |
| would be considered a household employer. | | | | childcare expenses up to $3,000 for one dependent or |
| On the other hand, an employee can be considered an | | | | up to $6,000 for two or more dependents. (Only one |
| independent contractor if this person has an office | | | | of these tax savings options may be used each year.) |
| elsewhere, comes to work with tools (cleaning | | | | Keep in mind that you cannot take advantage of any |
| equipment, etc.), and works unsupervised for many | | | | of this unless you can prove that you have an |
| different people. Now that you have determined that | | | | employee on payroll. |
| your employee is not an independent contractor and | | | | So now that you more or less understand what is |
| you are a household employer, what does this mean? | | | | required of you as an employer of a household |
| As an employer of a household employee, you are | | | | employee, where can you turn to have someone do |
| responsible for withholding taxes and remitting them to | | | | this tedious task of payroll taxes for you? |
| the tax agencies throughout the year. Your | | | | There are a number of companies out there who do |
| employee's wages fall under the Federal Insurance | | | | this type of payroll tax service, but only a few |
| Contribution Act (FICA), so a portion of the wages you | | | | companies specialize in the "nanny payroll tax". Some |
| pay must be withheld and paid as Social Security and | | | | of the leaders in this field are: Breedlove & |
| Medicare taxes. Both you and your employee are | | | | Associates, GTM and Home Work Solutions. They are |
| required to pay a percentage (7.65%) of the | | | | all solid companies who have been at it for many |
| employee's gross wages. If you want to pay the entire | | | | years and provide excellent service to their clients. |
| amount yourself, you can do so and list the employee's | | | | They are there to make this part of being a household |
| share as n additional taxable gross income. | | | | employer - simple and hassle-free. |