Nanny Taxes

When it comes to nanny taxes, the most frequently asked questions are:

• Is a nanny considered an employee or an independent contractor?

• Are paying taxes affordable?

• Do I have to pay taxes?

• How can I calculate my monthly tax expenses?

Household Employee vs. Independent Contactor

Since a nanny or babysitter performs services in or around the family's home, he or she is considered an employee, not an independent contractor. Therefore, families must follow all state and federal labor laws while employing their nanny or babysitter, including paying nanny taxes.

Is paying taxes affordable?

Many families want to know if they can afford to hire a nanny when factoring in nanny taxes. There is a common misconception that paying taxes is very expensive and a family won't be able to afford hiring a nanny while paying taxes on the salary. This is not true! Many families can take advantage of Dependent Care Accounts or Flexible Spending Accounts and Dependent Tax Breaks, which can offset or even exceed the nanny tax payments. That means by paying taxes a family can actually save money.

Some families decide to manage the process themselves. There are many great tax software available. For families who want to hire a professional service to process the nanny payroll and tax payments for them, we highly recommend that families contact Paycycle, the experts in household employee taxes. With PayCycle, you can enter your payroll online. Just enter hours and get instant paycheck calculations. You can then print checks directly on your own printer, or use PayCycle's free direct deposit. PayCycle guarantees the accuracy of the federal, state and local tax calculations. PayCycle will also provide you with everything you need to file and pay the employer's share of federal and state payroll taxes.

As a household employer, you must file Form 1040 Schedule H: Household Employment Taxes with your personal federal income tax return every year. PayCycle makes this easy. PayCycle completes a signature-ready Schedule H that you simply print, sign, and submit with the rest of your tax return. Completed W-2's are also included at no additional charge. For your state payroll taxes, the PayCycle Household service will pre-fill all necessary state forms and provide you with email reminders that tell you when the state filing is due, and how much tax must be paid.  You simply print out these pre-filled forms and mail them to the state.

PayCycle has an outstanding Customer Support Team to assist you with any questions. Customer support is available through phone or email and is absolutely free!

The Nanny and Babysitter Household service begins with a 30 day free trial followed by a 2 month introductory rate of $9.99 per month and the regular price is $19.99 per month thereafter.

To learn more about PayCycle's Nanny and Babysitter Household Service including a Free Demo, click here.