How to structure payroll and issue paychecks for a nanny share

[Anonymous]

We are starting a nanny share in August, where one nanny will be watching our child and another. We would like to use the NannyPay2 software to help us with tax withholding and to issue her paychecks. I am just not sure how to structure it. Do we each need to set up and account and we each pay our share? Will the withholdings still be correct if she is receiving 2 paychecks? Any general advice related to payroll and taxes for a nanny share situation appreciated. I would like to avoid using Breedlove or ADP or one of the more expensive payroll services if possible. Thank you!

[Anonymous]

Each family pays a separate check. Keep it separate.

[Anonymous]

So really each family could do their own thing? Choose their own payroll service? Just pay our portion as if we were a single employer?

[Anonymous]

Anonymous wrote:So really each family could do their own thing? Choose their own payroll service? Just pay our portion as if we were a single employer?

Yes. An accountant can confirm this.

[Anonymous]

The PP's are correct, but from what I understand the withholdings probably will not be calculated correctly. I actually spoke with homework solutions about this today because we are also setting up a share. They said that I need to notify them that I have a 50/50 share, and they will then tell me how to correctly override the calculated withholdings to take into account that we are only paying her half of her income.

[Anonymous]

Anonymous wrote:The PP's are correct, but from what I understand the withholdings probably will not be calculated correctly. I actually spoke with homework solutions about this today because we are also setting up a share. They said that I need to notify them that I have a 50/50 share, and they will then tell me how to correctly override the calculated withholdings to take into account that we are only paying her half of her income.

Which withholdings did they tell you would need to be adjusted?

[Anonymous]

Anonymous wrote:
Which withholdings did they tell you would need to be adjusted?

All of them. Her tax rate is determined by her whole salary, and you then apply that percentage to the portion you are paying.

[Anonymous]

We also do it separately, but as PP said you do need to make sure you're calculating withholding based on full salary (which also includes any outside over-the-table jobs nanny may have)--you may need to withhold at a different rate. Left to its own devices, the system the services use may look at what it thinks is the full salary and decide nanny won't need to pay taxes or is in a lower tax bracket than she actually is. We do a flat withholding amount to make sure enough gets withheld at the end of the year that our nanny won't owe penalties. Our nanny is also married and files taxes jointly, so that affected things as well.

[Anonymous]

Anonymous wrote:We also do it separately, but as PP said you do need to make sure you're calculating withholding based on full salary (which also includes any outside over-the-table jobs nanny may have)--you may need to withhold at a different rate. Left to its own devices, the system the services use may look at what it thinks is the full salary and decide nanny won't need to pay taxes or is in a lower tax bracket than she actually is. We do a flat withholding amount to make sure enough gets withheld at the end of the year that our nanny won't owe penalties. Our nanny is also married and files taxes jointly, so that affected things as well.

Nannies DO NOT need to report to you their other income. They can handle that directly with IRS. Any additional INCOME AMOUNT your nanny may have, is NONE of your business. Why are you creating this confusion?

[Anonymous]

I'm starting a nanny share and planning to use the NannyPay2 software (please post a referral code and you can get 3 free months and the user will get 1 month).

In my opinion, the larger issue in calculating withholdings is the nanny's completion of the W-4. My nanny didn't understand the worksheet and asked for our help in determining her exemptions. Although her income tax is totally her responsibility (including filling out the W-4) I would like to at least get her tax withholdings close to avoid her getting stuck with a big tax bill (which has happened to her previously).

As far as I can tell, NannyPay2 does not provide an option to calculate based on a share.

Does anyone know if any of the online calculators can perform calculations for a share?

[Anonymous]

If you are just paying FICA tax, it won't matter if you calculate separately or together. I used nannypay software and what I would do, if the nanny wants income tax withheld, is run one dummy paycheck on the entire amount and then just manually adjust the withholding.

The problem cones from the fact the nanny is, presumably, giving you a single w-4, but then being paid as if she has two jobs. You could also recalculate a second w-2 based on the exemption number she gave taking into the "extra" income from the second half of the job.

10:21 needs to chill out. No, the nanny doesn't need to report to you her exact other sources of income, whether it be a spouses job or other work. But your calculated withholding is ultimately based on get entire income (or, at least what she is reporting) not just the nannyshare income. Which is all anyone is saying.

[Anonymous]

Totally agree with PPs about making sure you tell the payroll service about the share. We did not our first year with our nanny and she ended up owing a lot of taxes at the end of the year.