Nanny Tax Deadline Looms for Parents
Mar 13th 2013 8:20AM
Updated Apr 3rd 2013 10:47AM
Household Employers Must Ensure IRS Compliance or Risk Costly Fines
GLENVIEW, Ill.--(BUSINESS WIRE)-- Each year more than a million parents nationwide elect to hire a nanny to care for their children. In fact, the U.S. Department of Labor cites the child care position as one of the fastest growing job sectors, expected to grow 20 percent faster than other positions by 2020. This means more than a million parents may or should be preparing to file their "nanny taxes" along with their personal income taxes by the April 15 filing deadline. Failing to pay the tax can result in back taxes, penalties, interest and fines up to $25,000.
Safety and convenience are common factors considered when hiring a nanny. However many parents are unaware when hiring a nanny or any other 'household employee' that they may be responsible for filing an annual "nanny tax" with the IRS.
"When you hire a nanny or other household employee, it's a bit like starting an in-home business. Parents have to keep up with all the tax laws and calculations as well as filing regulations from taxing agencies on the local, state and federal agencies," said SurePayroll CEO and President Michael Alter.
Nanny tax typically has to be paid when an employee earns more than $1,000 per quarter or $1,800 per year, and the process is complicated and time-intensive, similar to the requirements of a small business. There are multiple steps involved, including filing an application with the state for a Federal Employment Identification Number and submitting forms to confirm the prospective employee is eligible for work. Next, payroll needs to be set up and provisions made to pay Social Security taxes and keep track of tax deductions, medical benefits and other insurance. And then parents have to keep up with tax filings for multiple agencies.
"It is a ton of extra work for parents already pressed for time and energy-deprived. Fortunately for parents, there are online services that relieve much of the burden. Today, you can literally run payroll from your phone just about anywhere with some services," said Alter. "Not only are the right services cost-effective, but they can also provide peace of mind allowing parents to solely focus on the most important thing - their child."
Below is a quick list of nanny tax burdens a parent could expect an online payroll provider to handle:
- Paying the nanny either with direct deposit or by check - there's no additional fee for either.
- Collecting and paying all Social Security, Medicare, FUTA and other payroll taxes.
- Completing all Nanny Tax paperwork including a 1040-ES four times a year and a signature-ready Schedule H with your annual 1040.
- Providing a W-2 at the end of the year that the nanny can access online 24/7.
Parents who have not yet filed their nanny payroll taxes should be sure to seek guidance from an accountant or payroll professional.
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SurePayroll is a wholly owned subsidiary of Paychex, providing an easy, online, convenient payroll service that keeps our small business customers in control. SurePayroll also offers efficient online solutions for managing 401(k) plans, health insurance, workers' compensation, employee screening and more. For accountants and banking partners, SurePayroll provides private-label and co-branded services that enable them to offer online payroll processing to their small business clients. The company has received numerous prestigious awards for its innovative technology, and outstanding customer service and sales teams, including recognition from PC Magazine, Accounting Today, the American Business Awards and many others. For more information, please visit www.SurePayroll.com.
Paychex, Inc. (NAS: PAYX) is a leading provider of payroll, human resource, and benefits outsourcing solutions for small- to medium-sized businesses. The company offers comprehensive payroll services, including payroll processing, payroll tax administration, and employee pay services, including direct deposit, check signing, and Readychex®. Human resource services include 401(k) plan recordkeeping, section 125 plans, a professional employer organization, time and attendance solutions, and other administrative services for business. A variety of business insurance products, including group health and workers' compensation, are made available through Paychex Insurance Agency, Inc. Paychex was founded in 1971. With headquarters in Rochester, New York, the company has more than 100 offices serving approximately 567,000 payroll clients as of May 31, 2012. For more information about Paychex and our products, visit www.paychex.com.
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