Originally Posted by cbkiteflyer
I intentionally ignored the possibility of state/federal unemployment tax in order to simplify the scenarios. Please look again at the numbers I posted. There is a difference in the two scenarios, because if I choose to pay my employees share of FICA/Medicare, that amount, although considered income which is added to their gross income, is not \itself/ subject to FICA/Medicare tax. If this is not correct, please explain further.
Is it better to pay my household employee's share of FICA and Medicare tax, or is it better to withhold it from their pay? Let's say the goal is to provide my employee with $20 per hour take-take home pay (pre their income tax). Here are two scenarios:
#1. Payroll tax is deducted
A. Hourly wage: $21.66
B. FICA/Medicare tax (7.65% of A): $ 1.66 (withheld)
C. Hourly take-take home pay (A-B): $20.00
D. My Schedule H payment (2 x B): $ 3.32
E. My total hourly cost (A+D/2) $23.32===>$12.49;$24.98/2
F. My employee's taxable income (A): $21.66===>> assume a single nanny that is paid net $600/week for a 40 hour work week.
Net of SS/Medicare & Income Taxes
Net or Take Home Pay $600.00
SS/Medicare 7.65% $45.90
Gross Wage $645.90
Employer Cost/Wk. $645.90
#2. I pay their share:
A. Hourly wage: $20.00
B. FICA/Medicare tax (7.65% of A): $ 1.53 (not withheld)
C. My Schedule H payment (2 x B): $ 3.06
D. My total hourly cost (A+C): $23.06
E. My employee's taxable income (A+B): $21.53>Corrrect; As said, you need to include the amount of taxes that you pay in the employee's gross wages for income tax purposes but should not count them as Medicare or Social Security wages. say that You hire a household employee to care for your child and agree to pay cash wages of $100 every Friday. You expect to pay your employee $1,600 or more for the year. You decide to pay your employee's share of social security and Medicare taxes from your own funds. You pay your employee $100 every Friday without withholding any social security or Medicare taxes. For social security and Medicare tax purposes, your employee's wages each payday are $100. For each wage payment, you will pay $15.30 when you pay the taxes. This is $7.65 ($6.20 for social security tax + $1.45 for Medicare tax) to cover your employee's share plus a matching $7.65 for your share. For income tax purposes, your employee's wages each payday are $107.65 ($100 + the $7.65 you will pay to cover your employee's share of social security and Medicare taxes).
So if paying $450 per week net, the gross pay would be $450 for calculation of employer's tax liability. But Employees taxable wage should be $484.43
Your tax return must include Sch H only if you pay any single employee at least $2k in the current tax year, or cash wages to all household employees totaling $1k or more during any 3-month calendar quarter during either the current or previous tax year. Although you're not required to withhold federal income tax from a household employee's wages, you must file Sch H if you do withhold tax for an employee who requests it.
you need to contact payroll guy for more accurate info n detail