T 650.342.4394
F 650.342.1708
Matt Grodin CPA
  • Home
  • Your Taxes
    • When to Call us
    • Stock Option HELP!
  • Your Business
  • Our Firm
  • Contact Us
  • Blog
  • Portal
  • Home
  • Your Taxes
    • When to Call us
    • Stock Option HELP!
  • Your Business
  • Our Firm
  • Contact Us
  • Blog
  • Portal

I'm Hiring a Nanny (a nurse, a gardener, a maid...) do I need to give them a W-2 and withhold taxes?

8/7/2015

0 Comments

 
There are specific rules regarding whether a 1099 or a W-2 is needed, and it often comes down to the level of control you have over the individual. You to use the following factors to determine whether you have hired an employee or independent contractor. 
  • Are they working for you occasionally, or full time
  • Do you set the schedule?
  • Do you provide instruction or supervision?
  • Do they provide and pay for subcontractors
  • Do they provide their own supplies and equipment?
  • Do you pay them regularly, or per job?
  • Do they cover their own transportation costs?
  • Do they have multiple clients?
  • Do they take a risk of loss - i.e. do they advertise, rent an office, or have equipment? Then they are running their own business and are a contractor.
  • Is there a specific contract time period?


Its often not clear cut - but nannies are often employees when you add it all up. Gardeners, not so much.  

Why does it matter? Payroll taxes are expensive, and the cost of running payroll is expensive too. You can handle it yourself, but most end up using a payroll service. In addition to payroll and taxes, there are additional compliance concerns.

Household Payroll Procedures

Federal household payroll taxes are handled on your income tax return, but you will need to handle the state taxes separately (or through a service).  If you pay $1900 in a year, or $1000 a quarter, you will file Schedule H with your 1040. On this schedule, you report Social Security (12.4%), Medicare (2.9%), and FUTA (0.6% of the first 7k). You can withhold half of the social security and medicare from the nanny pay, however, if you agreed with the nanny on a flat amount, you may end up paying the full amount of payroll tax yourself, raising the cost more than 15%.

For California, the threshold is $750 a quarter. If you pay more than $20,000 a year, you move from annual reporting to quarterly reporting. There are specific payroll tax forms for California. The state taxes aren't high, but there are several of them (SDI, UI, ETT).  

If you determine that you are hiring an employee, I'd recommend that you contact a payroll service to help you with the paperwork.

 
0 Comments



Leave a Reply.

    Picture

    Author


    I spent 13 years in big-4 accounting firms before leaving to start his own small firm in San Mateo. You can find more about me in the "our firm" tab. 

    I plan to use this space to highlight tax concepts and tax law changes in easy to understand language. Each post will have examples on how typical taxpayers are affected by life events or the ever-changing US tax landscape. Nothing in here is canned - its all written by me. 

    Archives

    December 2015
    November 2015
    August 2015
    February 2015
    January 2015
    December 2014

    Categories

    All
    Tax Planning

    RSS Feed