Does My Nanny Have to Pay Taxes?

Apr 8, 2022 | Payroll, Taxes & Labor Laws, Working as a Nanny

A nanny or other employee who works in your home is responsible for reporting and paying required payroll taxes. It is worth making sure that they are aware of their responsibilities at the start of employment, if they do not already know. As a nanny, or other household employee, there are four key taxes that they are liable for:

  1. Social Security (OASDI) at 6.2%. If the household employee is getting paid $2,400 gross or more in 2022, they are required to withhold and pay Social Security.
  2. Medicare at 1.45%. If the household employee is getting paid $2,400 gross or more in 2022, they are required to withhold and pay Medicare.
  3. Federal income Tax not required to be withheld*
  4. State income tax not required to be withheld*

*Federal and state income taxes are not required to be withheld unless agreed upon by the employer and the employee.

But this shouldn’t be confused with not having to owe any Federal and State income taxes. A nanny may pay their own income taxes either at the end of the year or as an estimated payment to the IRS and/or your state. Your must give your nanny a W2 form and a copy to the IRS indicating how much you have paid your employee and they must file that form with their personal tax return. More often than not, it’s a good idea to withhold the income taxes from their pay, so come April 15th they are not short a significant amount of income tax. By doing this they will then get a chance to get a refund when they file their own tax return.

Therefore, it is advantageous to withhold federal and state income taxes because it:

  • helps employees distribute their owed income taxes throughout the year, rather than as a lump sum at the end of the tax year;
  • helps to document an employee’s legal employment history; and
  • ensures both employer and employee are complying with the law.

Visit our payroll partner, GTM Payroll Services, for more information on tax requirements for both nannies and families.

Looking to hire a nanny? Contact us at (518) 348-0400 and let us know how we can help!

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