We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
The nanny tax refers to federal taxes imposed on individuals who employ domestic workers, such as nannies or housekeepers, and pay them more than $1,000 in total wages during a tax year. The Internal Revenue Service (IRS) classifies these domestic workers as employees, which means that the employer is responsible for withholding and paying specific taxes, including Social Security, Medicare, and federal unemployment taxes, on the wages paid to these employees.
Table of content
Legal Use & context
The nanny tax is relevant in the context of employment law and tax law. When hiring a domestic worker, the employer must understand their responsibilities regarding tax withholding and reporting. This includes filing the appropriate forms with the IRS and potentially state tax authorities. Users can manage these obligations using legal templates and forms available through services like US Legal Forms, which provide guidance on proper compliance.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A family hires a nanny and pays her $1,200 for the year. Since the total wages exceed $1,000, the family must file the necessary tax forms and pay the applicable nanny tax.
Example 2: A household employs a housekeeper for several hours a week, resulting in total wages of $1,500 for the year. The employer is responsible for withholding and paying the nanny tax on these wages. (hypothetical example)
State-by-state differences
State
Key Differences
California
Requires additional state payroll taxes.
New York
May have specific local regulations regarding domestic workers.
Texas
No state income tax, but federal requirements still apply.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Common misunderstandings
What to do if this term applies to you
If you hire a domestic worker and pay them more than $1,000 in a year, you need to:
Determine the total wages paid and confirm the employee classification.
Withhold and pay the required Social Security, Medicare, and unemployment taxes.
File the appropriate tax forms with the IRS and any relevant state authorities.
Consider using US Legal Forms for templates that can simplify this process. If you find the tax obligations complex, consulting a legal professional may be necessary.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.