Do you have a household employee? Don’t ignore the nanny tax

It’s simple enough to overlook this tax related to household employees. But you could be in trouble if you do. Here’s why you’d better pay attention to the nanny tax.

As you review your filing requirements for 2018, make sure you don’t overlook the nanny tax related to household employees. If you have a housekeeper or any other household employee, you could be liable to pay state and federal payroll taxes.

How to know if you must pay the nanny tax

First, you’ll need to determine whether you have a household employee. Generally, this is someone you hire to work in or around your house. It could be a babysitter, nurse, gardener, etc. It doesn’t matter whether they work part-time or full-time, or whether you pay them hourly, weekly, or by the job.

But not everyone who works around your house is an employee. For example, if a lawn service sends someone to cut your grass each week, that person is not your employee.

As a general rule, workers who bring their own tools, do work for multiple customers and/or control when and how they do the work are not your household employees.

Your responsibilities

If you have a household employee, you’ll generally be responsible for 2017 payroll taxes if you paid that individual more than $2,000 last year. However, federal unemployment tax kicks in if you pay more than $1,000 to all domestic employees in any quarter.

It’s not always easy to tell whether you have a household employee, or whether exceptions apply. If in doubt, don’t hesitate to call our office.

Certified Public Accountant for Edith Christian CPA, Accounting Services for Individual and Small Businesses in Waukesha and Milwaukee. Tax Preparation, Bookkeeping, Retirement and more. Edith Christian graduated Magna Cum Laude from the University of Wisconsin-Whitewater with a BBA in accounting in 1982 and became a CPA in 1983. She worked as tax manager with Arthur Andersen & Co. (formerly one of the Big Eight public accounting firms) in Chicago from 1982 to 1990. Edith has been in her own tax practice since 1992 in the Lake Country area. She is a member of the American and Wisconsin Institute of CPA’s as well as a member of the Collaborative Family Law Practice of Wisconsin.

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