Post # 1
we’ve decided to take the nanny route for childcare starting in August. I wanted to see if any of you have recommendations for software or online programs to figure out nanny taxes. Do you print out a pay stub for the nanny? Do you advertise your rate pre- or post-taxes? Are these programs costly or worth it? Can you get away with not paying taxes on the first $2000 spent on nanny expenses? FWIW, I am planning on paying $300 per week for 3 days a week, which comes out to about $12.50/ hour. I also plan on using $5000 per year from my flex spending account. Thanks!
Post # 2
I would imagine for a nanny, you wouldn’t take out taxes but they would just have to put money aside to pay the taxes themselves. That’s how many do it in my area. Also, always advertise the amount before taxes. That’s what any professional job does.
Post # 3
Swebs14 : the nanny’s employer is responsible for setting aside social security, at least
Post # 4
Legally, you are responsible for withholding taxes. If you pay someone more than $2000 (maybe a few hundred more than that, I don’t know for sure) a year, you are responsible.
However, in my area, it’s always done under the table.
So, you can do with that what you wish. I believe Care.com offers information on how to withhold taxes.
No, you shouldn’t need to do pay stubs. Just an annual W-2. And since you’re paying the same amount every week, this should be really easy.
Post # 5
lovelyruby : thanks! I would do it under the table but I want to take advantage of my tax-free FSA money. I can’t do both.
Post # 6
There are a lot of third-party solutions for this kind of thing. I worked for a personal financial planning, wealth management, and tax accounting firm in grad school and we used HomeWork Solutions to help clients manage withholding and payments for personal assistants and the like. It’s an easy solution and creates a paper trail that can protect you from any reporting issues or potential disputes should your nanny end up not working out.