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[quote=Anonymous]I would first talk to your tax service and clarify exactly what is going on, since it sounds like you may or may not have a handle on that--not a dig, it is really confusing.

As an employer, you need to pay the employer portion of FICA plus unemployment tax (both state, which is usually paid quarterly, and federal, which is also known as FUTA and can be paid annually).  You are also obligated to EITHER withhold the employee's portion of FICA or, if you fail to do that, you must pay her portion of that as well.  Either way, you need to present her with a W-2 at the end of the year showing you what you withheld and/or paid so she can file her taxes.

As a household employer, you are not obligated to withhold her income tax.  She can file quarterly based on her expected earnings, or she can file annually like most people do.  This may seem unfair in that it can be complicated, and it may result in the nanny having to pay taxes as opposed to getting a refund, but in that sense, she's had access to her money all year rather than (in a sense) loaning it to the government for a period of several months.  I have an accountant friend who maintains that if you regularly get a big refund, you're probably having too much withheld, so that's a different perspective.

We withhold our nanny's portion of FICA, pay our FICA portion annually (as opposed to quarterly), pay FUTA annually, and make a quarterly payment to our state's unemployment tax.  We don't withhold income tax.  [/quote]

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