In order to file returns with the IRS and the state, youвЂ™ll need to obtain a Federal Employer Identification Number (FEIN) as well as state tax ID(s) for unemployment insurance and, if applicable, state income taxes. Obtain federal and state employer tax IDs. Worker misclassification is considered a form of tax evasion and is a risk you should not be willing to take. This means your nanny should be given a W-2 form, rather than a 1099 form, to file their taxes. This is regardless of the amount of hours worked, wages paid or whatвЂ™s written in an employment contract. The IRS has ruled that, with very few exceptions, nannies are employees of the families for whom they work - not independent contractors. Know that your nanny should be classified as a household employee. Nannies become eligible for state unemployment benefits, and a traceable payment history enables them do things like apply for credit cards, rent an apartment or lease a car.ДЇollow this simple compliance checklist, and you can meet the requirements laid out by the IRS and your state. While complying to these state and federal laws means you wonвЂ™t be at risk of being slapped tax evasion fines, there are benefits for the caregivers, too. вЂњIt costs a little bit more than not paying legally, but it is so worth it.вЂќ вЂњWe actually have nannies approaching us to work for us because we pay legally,вЂќ says Paul Cuthbert, of Newport, Michigan, who has hired several nannies. Nanny taxes refer to the federal and state payroll and tax responsibilities families have to manage when they hire a nanny to work in their home. It also means complying to state and federal regulations, including what many people call вЂњnanny taxes.вЂќ That means putting the terms of your working relationship into a contract, deciding on benefits and setting up payroll.

Now what? Know that as soon as your nanny accepts your job offer, your responsibilities as an employer begin. Congrats! YouвЂ™ve found a nanny youвЂ™d like to hire.

Nannypay vs quickbooks vs surepayroll