W-2 help for household employee

[Anonymous]

I am working on generating a W-2 online for our nanny. We pay her share of the SS and Medicare, so the amount in Box 1 (Wages, tips, compensation) is different from the amounts in Box 3 (social security wages) and 5 (Medicare wages and tips).

Should the amount in Box 16 (State wages, tips) match Box 1 or Boxes 3 and 5?

[Anonymous]

If you pay her share of SS and medicare, you need to gross up her salary until it nets to what you are contributing.

The amounts in box 1 and bax 3 and 5 should be the same.

A situation when those boxes are different are when you make so much money that you max out what you need to contribute to SS.

[Anonymous]

Anonymous wrote:If you pay her share of SS and medicare, you need to gross up her salary until it nets to what you are contributing.

The amounts in box 1 and bax 3 and 5 should be the same.

A situation when those boxes are different are when you make so much money that you max out what you need to contribute to SS.

No there is a special rule for household employees that if you pay their employment taxes they have to pay income tax on that, but they don't have to pay employment tax on it as well, so the amount of tax you are paying for them is added to box 1 but not box 3 and 5. This is how pub 926 describes it--

"Not withholding the employee's share. If you prefer to pay your employee's social security and Medicare taxes from your own funds, do not withhold them from your employee's wages. The social security and Medicare taxes
you pay to cover your employee's share must be included in the employee's wages for income tax purposes. However, they are not counted as social security and Medicare wages or as federal unemployment (FUTA) wages."


OP, in my experience, state income tax is based on federal income tax so I would put the amount of box 1 on box 16. Also not sure if you are already doing this, but I found the SSA site very helpful because it both electronically files your w-3 and generates a printable PDF of the w-2.

[Anonymous]

Yeah its a racket

[Anonymous]

Anonymous wrote:Yeah its a racket

what part is the racket?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yeah its a racket

what part is the racket?

the idea that household employees need to waste money and time to do it

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you pay her share of SS and medicare, you need to gross up her salary until it nets to what you are contributing.

The amounts in box 1 and bax 3 and 5 should be the same.

A situation when those boxes are different are when you make so much money that you max out what you need to contribute to SS.

No there is a special rule for household employees that if you pay their employment taxes they have to pay income tax on that, but they don't have to pay employment tax on it as well, so the amount of tax you are paying for them is added to box 1 but not box 3 and 5. This is how pub 926 describes it--

"Not withholding the employee's share. If you prefer to pay your employee's social security and Medicare taxes from your own funds, do not withhold them from your employee's wages. The social security and Medicare taxes
you pay to cover your employee's share must be included in the employee's wages for income tax purposes. However, they are not counted as social security and Medicare wages or as federal unemployment (FUTA) wages."


OP, in my experience, state income tax is based on federal income tax so I would put the amount of box 1 on box 16. Also not sure if you are already doing this, but I found the SSA site very helpful because it both electronically files your w-3 and generates a printable PDF of the w-2.

OP here: yes, this is correct. 926 includes a very helpful example with this scenario where the employer contributes the employees' share of SS and Medicare. I could not find any guidance about it for state taxes. What I was able to figure out was that you don't owe SUTA on the SS and Medicare portion for household and agricultural workers.

[Anonymous]

OP here: thank you. I am using the SS website. It is very handy. For now, I am goin with making Box 1 and box 16 the same.