Hiring a nanny is a popular option for parents, but it has its complications from a paperwork point-of-view. In essence, hiring a nanny triggers requirements similar to those faced by a small business.
To legally hire a nanny, you need to:
- Verify that she’s eligible to work;
- Pay Social Security taxes for her;
- Keep track of tax deductions, medical benefits and other insurance.
That requires, in essence, setting up a payroll. SurePayroll can help you stay compliant with all nanny payroll requirements in a painless manner.
If you pay your nanny more than $1,000 per quarter or more than $1,800 for a year, you may be responsible for paying the Nanny Tax. Using our nanny payroll service is the easiest way to stay compliant with the law.
SurePayroll will also take your information and file a quarterly 1040-ES on your behalf. Overall, we help you avoid problems with the IRS.
Prior to setting up a payroll, you must verify your nanny is eligible to work by following U.S. Citizenship and Immigration Office procedures. That usually means having the nanny fill out an I-9 form to verify eligibility.
You’ll probably need to see her passport or some combination of documents such as her Social Security card, driver’s license, birth certificate, passport, green card or work permit. It’s a good idea to make copies of the documents, and keep them in your records with the signed and dated I-9 form.
You will also need to apply for a Federal Employer Identification Number or EIN. You can find an application online here. You will need to contact your state government for a state EIN.
Keep in mind that some find it tempting to skip or shortchange the reporting requirements, but it is not a trivial matter. There are severe penalties — up to $25,000 — for those who try to avoid paying the nanny tax. You could also face tax evasion charges or even imprisonment in extreme cases.
Since the goal is to care for your children, not spend hours filling our confusing paperwork, setting up an online payroll system immediately for your nanny situation is a prudent move that provides piece of mind and avoids IRS problems.