Taxes owed to IRS are sky high at the end of the year for Nanny shares

[Anonymous]

Hi fellow Nannies. Those that are in nanny share arrangements. Have y’all noticed that we owe IRS large amount of money when tax season is here. Even though we are taxed every pay period!

[Anonymous]

This happened to our former nanny when we did a share! The problem is that neither employer takes out enough taxes because your tax rate/bracket is calculated separately for each family. So the payroll software calculates your tax withholding based on the wrong tax bracket (too low!). Basically, you are being taxed each paycheck as if your annual salary was only half of what it really is. Then when tax season rolls around, you owe.

To fix this next year, you should have each employer withhold an extra amount each pay period. Or see if the W4 has a calculator to help you figure out what to do for more than one job. For tax withholding purposes, you have two separate jobs.

[Anonymous]

^ this exactly. The nanny families are withholding the correct amount if that was your only job. But once you put the two nanny jobs together on your tax return, it bumps you up to a higher tax bracket and you owe more.

This sometimes happens to married couples as well, whose individual salaries put them in a lower tax bracket but when their salaries are combined, they bump up into a higher tax bracket.

Ask your employees to withhold more from your paycheck.

[Anonymous]

Thank you for the advice