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Being a household employer comes with a fair share of paperwork. Getting set up as an employer, withholding and remitting nanny taxes, and taking care of year-end taxes all require forms to be filled out by you and/or your nanny.
Here are the 10 nanny tax forms every household employer will need.
Forms for setting up as an employer
1. Form SS-4
When you hire someone to work in your home like a nanny, housekeeper, or in-home senior caregiver, you are now an employer and need to apply for a federal employer identification number (EIN).
Complete Form SS-4 to get your EIN or apply for it online.
2. State Tax ID
Along with your FEIN, you will need an employer ID for your state as well for remitting unemployment taxes and other state tax responsibilities. Visit your state's tax agency website to get your state EIN.
Forms when hiring a nanny or household employee
3. Form W-4
Form W-4 is provided to your nanny so you can withhold the correct amount of federal income tax from their pay. Household employment is one of the few industries where withholding federal income taxes is optional for employers. However, it is recommended to withhold income taxes from your nanny’s wages. If you do not, then they will owe their entire income tax obligation when they file their personal tax return. Or they need to set aside money themselves to pay their income tax.
4. Form I-9
Families with household help must collect Form I-9 from their workers at the start of employment. Form I-9 confirms your employee’s identity and authorization to work in the U.S. They must submit documents like a U.S. Passport, driver’s license, Social Security card, or birth certificate to prove their identity and employment authorization.
Form I-9 must be signed no later than the first day of employment and the documents must be presented within three business days from the start of employment. As an employer, you must inspect the documents, make copies, and return the originals to your employee. Their documents must reasonably appear to be genuine and relate to the employee. The copies of the documents are kept in your employee’s personnel file with Form I-9. It is not returned to any government agency.
Form I-9 can be completed electronically to help reduce errors.
5. New Hire Report
When you hire someone like a nanny to work in your home, you need to file a new hire report with your state labor department or another designated agency. It can be filed shortly after your employee starts work. Most of the information required for a new hire report is already collected on Form W-4.
Forms for remitting nanny taxes
6. Form 1040-ES
You can remit your and your employee’s share of Social Security and Medicare taxes, federal unemployment taxes, and federal income taxes each quarter using Form 1040-ES. It is recommended to remit these taxes quarterly, so you do not have to pay your entire nanny tax obligation when you file your personal tax return. If you owe too much, you may be subject to an underpayment penalty. Another option is to increase the withholdings from your own pay to help cover your nanny tax responsibility.
Your state may also require quarterly filings of state unemployment taxes.
Year-end nanny tax forms
7. Form W-2
By January 31, you will need to provide your nanny with their Form W-2. This document reports their wages and the taxes withheld from their pay. Your employee will need this form to file their personal tax return. Since a nanny or other household worker is your employee, they need to receive a W-2 and not a 1099, which is given to independent contractors. You control your worker’s schedule and duties and provide the tools and equipment to do their job. That means you control employment and have hired an employee.
8. Form W-3
Also by January 31, you will need to file Form W-3 (Transmittal of Wage and Tex Statements) and a copy of your employee’s Form W-2 with the Social Security Administration. Form W-3 sums up all of your employees’ W-2 data (even if you only have one worker) and include employer information in a single document. Completing the form is not a big hassle but do not forget to do it!
9. Schedule H
Schedule H is attached to your personal tax return and is where you report household employment taxes – including Social Security, Medicare, and federal unemployment and state unemployment taxes – to the IRS.
10. Form 2441
Wages you pay your nanny (and possibly an in-home senior caregiver) are qualified expenses for the Child and Dependent Care Tax Credit. Attach Form 2441 with your personal tax return to take advantage of this credit. For the 2021 tax year (filing in 2022), the Child and Dependent Care Tax Credit was greatly expanded.
Reposted with a permission from GTM (www.gtm.com)
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