In the Atlanta metro as well as across the state, long wait lists at the best day care locations and Montessori preschools are normal. When expecting there is time to get on wait lists, but if relocating quality child care may be more difficult than finding a new home.
The price of quality care is also approaching or surpassing college tuition. For more families with two or three small children, a nanny or nanny share is becoming an alternative. Before hiring a nanny, however, learn more about your tax obligation as an employer.
Medicare and Social Security withholdings
Tax law has complicated rules for distinguishing between an employee and an independent contractor. Nannies almost always fall within the employee category.
This means whether you hire a nanny for your family or enter in a nanny share arrangement with another family, you will need to consider employment taxes. Failing to pay these taxes could result in significant back taxes and penalties.
If you pay a nanny more than $2,100 this year, you must withhold Medicare and Social Security taxes. The employer and employee split this amount, which means your contribution is 7.65 percent.
Start out right
Get sound advice about potential tax issues from the beginning. This also ensures an accurate comparison of nanny costs versus local day care options.
Generally, you will receive some benefit from filing for the child and dependent care tax credit. Ensuring you are complying with IRS rules for nanny employment avoids triggering an audit when you apply for the credit as well.
If you have hired a nanny for several years under the belief she or he was an independent contractor, do not wait for the audit notice from the IRS. Find out how to fix the situation today.