Originally Posted by rjdlj
#1: Assume a household nanny works in New York for less than a calendar quarter and makes about $700-800. As an employer, I do not need to withhold SS or FICA. I also do not need to pay FUTA.
#2:However, I do need to pay NY state unemployment taxes.
#3:At the end of the year, what do I provide the nanny? I know do not provide a W2 because I did not withhold SS or FICA. I also know I do not provide a 1099 as the nanny does not qualify as an independent contractor. Since the nanny's wages were reported to NYS, I assume I need to provide the nanny some type of report regarding the nanny's wages. So what should I do?
#1:Correct; as long as your household worker is an EE, then you, as the ER, may be required to comply with various payroll tax requirements. For the year 2012, one important threshold amount is $1,800. If you paid your EE, this amount or more during the year, you are generally required to pay social security taxes on your worker’s behalf. The FUTA states that you must pay the federal government 6 percent (actually 0.8% if you pay by April 15 of the following year.)of the nanny's first $7K of earnings. if you pay at least $1K in any quarter of the current calendar year or the preceding year.
#2:States allow nanny taxes to be withheld. These taxes are for state unemployment and in some states workers compensation insurance. The percent and forms required differ from state and failure to withhold the appropriate taxes can result in hefty penalties. Employers who pay at least one employee $300 or more in a calendar quarter are required to pay unemployment insurance tax. ERs who hire domestic workers must pay the insurance if the domestic worker earns $500 or more in one or more calendar quarters. The insurance is not allowed to be deducted from EE wages. ERs who formerly paid unemployment insurance but who have not paid or employed a worker for four calendar quarters do not have to continue to pay the insurance. ERs are required to register with the Department of Labor to make their quarterly unemployment insurance payments, which are based upon the number of EEs the ER hires and the gross wages for hired EEs.
You need to check with your state tax center for more information about their requirements.
#3: Before completing the form, you will need to determine whether your nanny was an EE or an independent contractor. You donot need to file Sch H of 1040 since you didn’t pay total cash wages of $1K or more in any calendar quarter of 2012 to your household EE. UNLESS you pay Social Security and Medicare wages of $1.8K or more, you do not need to fill out Form W-2 for your nanny. However, the IRS considers her to be a household EE, so you should provide her with a W-2 (You must provide a W-2 to all EEs regardless of the amount you paid them.) ,without withholding Soc Sec taxes, so she can file her personal income taxes. Nannies and other household EEs who earn less than $1K still must pay their own income, FICA, and FUTA taxes unless their overall income is so low that they’re not required to file a tax return. As yusaid, she is not an IC, you don’t need to give her 1099/you do not need to submit a copy of 1099/1096 to the IRS either. Tax is withheld only if the nanny requests it and the ER agrees to withhold it. If there is no withholding, or not enough is withheld, the nanny is responsible for paying estimated taxes to the IRS on a quarterly basis. If the amount is all of her income, then she’d not be subject to fed/state taxes.