Where to find tax info. for nannies?

[newmomrose]

I would imagine this has been covered before, but had no luck in my search... so,

I worked all spring, and kept track of the payments I made to our childcare provider, who worked in our home, caring for only our child. She would like to claim the money as income and be above-board on her taxes, and I would like to claim the payments as childcare expenses for us. What do we need to do to make sure we have things documented correctly? Is there a particular form we need to do? She called the IRS the other day and said she talked to 4 different people over 30 minutes, and none of them had an answer for her.

Has anyone done this?

TIA!!!

[Anna Phor]

http://www.irs.gov/publications/p926/ar02.html

[Austin'smom]

If you haven't already, you will need to request a EIN, employer identification number, from the IRS. You can request a EIN by filing Form SS-4. All of the forms you submit to the IRS will need to have your EIN on them, not your social security number. W-2s must be provided to each household employee within 30 days after the last payment of the year. When you file your taxes you will file Schedule H with your Form 1040. Additional information can be found in IRS Publication 926. Filing as above will allow you to take the Dependent Care Credit on your 1040. I hope this helps.

[newmomrose]

Thank you so much, this is just what I needed!

[RaeEllen]

Have you been withholding? FICA taxes (social security and medicare) as opposed to income taxes are approxamately 15% of salary. Generally half of that is deducted from the employee's paycheck and the employer pays the other half. If you haven't been deducting, you can't legally make your nanny pay you the back taxes and you will be responsible for the entire amount when you file your schedule H. (So this is a warning to be ready for what could be a large financial hit and advice for the future.)

To be completely above board you also need to be in compliance with your state. I'd check your state's tax website. Normally there is a state ID you need to apply for. And you need to look into your state's unemployment tax rules.

Some people throw up their hands at all this and just give their nanny a 1099 at the end of the year. This is never legal for a household employee and could give you major tax headaches years down the road if you are caught.

[newmomrose]

I haven't been withholding, but I found out that the amount we have paid is less than the cutoff for SS, medicare, and unemployment contributions. I did go ahead and get a tax ID number and we will give her a W-2 at the end of the year. We only used her part-time for three months while I had a long-term substitute teaching job so the total payments don't amount to too much.

I will be working next school year though so this is all good to know! We are considering doing a nanny-share with another family. In that case, do we just use our same tax ID (we will hire someone new) and only record what we are paying and the other family records what they are paying?

Thanks for the help.

Makes daycare seem so much easier!!