Have to pay new nanny for first time today - please help with basics!

[Anonymous]

I've skimmed through some of the topics here. I'm sure this has been covered but I haven't found exactly the info I'm looking for.

Basically our nanny started this week. She's working 4 days this week so I need to pay her tonight. I've done absolutely no preparation unfortunately. I want to do everything on the up-and-up. We've agreed to an hourly rate, which is her net pay rate. I got some estimated tax amounts from care.com's nanny-tax-calculator.

So here's the question. Can I just write her a check for the agreed upon amount plus the tax amount, and then figure out all the forms and whatnot later?

I apologize for being so clueless. Please help!

[Anonymous]

Yes, just give her a check.

[Anonymous]

Until you figure it all out, for now just write her out a check for the hours she worked this week.

[Anonymous]

Anonymous wrote:Until you figure it all out, for now just write her out a check for the hours she worked this week.

OK, just straight hourly rate times hours? Don't add in any tax or anything?

[Anonymous]

OP again. OK I think this answers my question, from care.com FAQ:


Care.com FAQ: So, I’m only supposed to pay the net amount each pay day? What happens to the taxes?

Care.com answer: Yes, each payday your employee receives the net pay amount. The difference between the gross wages and the net pay are considered the employee’s “tax withholdings.” The tax withholdings remain in your bank account until they are due to the appropriate tax authority. At that time, we remit the taxes along with the appropriate employment tax returns.

https://www.care.com/homepay/service-faqs-1402251530

[Anonymous]

Did you actually agree with her on a net pay rate? Were you clear that that only meant net of FICA taxes and not income taxes? Did you get a W-4 form and agree on how income tax would be handled? If not, I'm afraid this is not something you can figure out in a day. You have no idea what her tax situation is and what her effective income tax rate is.

You can, legally, increase her net pay rate by about 8%, withhold her FICA, and call it a day. But, that leaves the huge issue of income tax on the table. It would be a nasty surprise come January for her if she thinks her pay is truly net of all taxes.

[Anonymous]

Anonymous wrote:Did you actually agree with her on a net pay rate? Were you clear that that only meant net of FICA taxes and not income taxes? Did you get a W-4 form and agree on how income tax would be handled? If not, I'm afraid this is not something you can figure out in a day. You have no idea what her tax situation is and what her effective income tax rate is.

You can, legally, increase her net pay rate by about 8%, withhold her FICA, and call it a day. But, that leaves the huge issue of income tax on the table. It would be a nasty surprise come January for her if she thinks her pay is truly net of all taxes.

This. You also need to have her fill out an I-9 and a W4 (which will tell you about the income taxes). You can download these forms from the IRS. If you've really agreed to "net" a certain amount including all income taxes, I hope she has a bunch of exemptions, or you may have A LOT of money to add to each check!

[Anonymous]

Also, if you don't actually withhold, it changes her gross amount which changes the taxes you owe. You can figure this out in a day, but you need a few dedicated hours to really do the research and the calculations. Otherwise, I would write her the check for the agreed-upon hourly amount x number of hours for today, and figure it out for next week.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Did you actually agree with her on a net pay rate? Were you clear that that only meant net of FICA taxes and not income taxes? Did you get a W-4 form and agree on how income tax would be handled? If not, I'm afraid this is not something you can figure out in a day. You have no idea what her tax situation is and what her effective income tax rate is.

You can, legally, increase her net pay rate by about 8%, withhold her FICA, and call it a day. But, that leaves the huge issue of income tax on the table. It would be a nasty surprise come January for her if she thinks her pay is truly net of all taxes.

This. You also need to have her fill out an I-9 and a W4 (which will tell you about the income taxes). You can download these forms from the IRS. If you've really agreed to "net" a certain amount including all income taxes, I hope she has a bunch of exemptions, or you may have A LOT of money to add to each check!

And, sorry to keep piling on, but just so you really understand the mess of promising a net pay rate, she can say whatever she wants to be withheld on her W-4. Many people overwithhold to be on the safe side or to get a big tax refund. (Not the optimal strategy financially, but perfectly legal) Is she then going to return her tax refund to you?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Did you actually agree with her on a net pay rate? Were you clear that that only meant net of FICA taxes and not income taxes? Did you get a W-4 form and agree on how income tax would be handled? If not, I'm afraid this is not something you can figure out in a day. You have no idea what her tax situation is and what her effective income tax rate is.

You can, legally, increase her net pay rate by about 8%, withhold her FICA, and call it a day. But, that leaves the huge issue of income tax on the table. It would be a nasty surprise come January for her if she thinks her pay is truly net of all taxes.

This. You also need to have her fill out an I-9 and a W4 (which will tell you about the income taxes). You can download these forms from the IRS. If you've really agreed to "net" a certain amount including all income taxes, I hope she has a bunch of exemptions, or you may have A LOT of money to add to each check!

Thank you for the replies. I'm pretty sure we agreed it was net of FICA taxes. As I was discussing this with her, she mentioned that if we were going to "declare her", it would be about $2 more per hour, so that it nets to the agreed amount.

I think I'll just write her a check for net pay rate times hours and figure out the rest later.

Luckily I have tons of spare time that I was hoping I could spend unraveling some unnecessarily complicated bureaucracy!

[Anonymous]

You need to file for a federal EIN asap, have her do the I-9 and W-4 tonight, write the check for net rate * hours. Then, check your contract to see if it's net after FICA or after FICA and federal, or worst for you, FICA and federal/state. You need to run the numbers. Nanny's FICA is 7.25% of gross, if you have to figure state and federal, it's a lot more. You also have to match FICA, pay state unemployment, and you should probably do worker's compensation. You can't figure out anything about how much taxes you're withholding for the nanny to get to the net pay until you find out for sure about what you agreed. Good luck, OP!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did you actually agree with her on a net pay rate? Were you clear that that only meant net of FICA taxes and not income taxes? Did you get a W-4 form and agree on how income tax would be handled? If not, I'm afraid this is not something you can figure out in a day. You have no idea what her tax situation is and what her effective income tax rate is.

You can, legally, increase her net pay rate by about 8%, withhold her FICA, and call it a day. But, that leaves the huge issue of income tax on the table. It would be a nasty surprise come January for her if she thinks her pay is truly net of all taxes.

This. You also need to have her fill out an I-9 and a W4 (which will tell you about the income taxes). You can download these forms from the IRS. If you've really agreed to "net" a certain amount including all income taxes, I hope she has a bunch of exemptions, or you may have A LOT of money to add to each check!

Thank you for the replies. I'm pretty sure we agreed it was net of FICA taxes. As I was discussing this with her, she mentioned that if we were going to "declare her", it would be about $2 more per hour, so that it nets to the agreed amount.

I think I'll just write her a check for net pay rate times hours and figure out the rest later.

https://www.youtube.com/watch?v=_Di_tsmu2Eo

Luckily I have tons of spare time that I was hoping I could spend unraveling some unnecessarily complicated bureaucracy!