Reply to Paying Nanny's taxes

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[quote=Anonymous]OP, you will need to clarify with your candidate what she means by "taxes."  There are two sorts of taxes: income taxes (federal and state), and payroll taxes (FICA/Medicare).  The employee is solely liable for income taxes.  The employer and employee each contribute a share of payroll taxes -- the employee's share of payroll taxes is usually withheld by the employer from each paycheck and then remitted to the feds quarterly via estimated taxes.  Household employers are not required to withhold the employee's income taxes (state/fed) from their checks, but most who are paying on the books do so (they then pay the withheld amounts to the proper state and fed authorities).

That said, some household employers may ALSO actually pay their nanny's share of payroll taxes and/or pay their nanny's income taxes (state or fed).  In either of these cases, since the employer is paying something on behalf of the employee, the amount paid by the employer is treated as additional income -- and the employer (and employee) actually owe payroll taxes on THAT additional income as well.  For these reasons, as well as others, when we employed a nanny we did not pay her share of payroll taxes or make any contribution to her income taxes.

I suggest reading IRS Publication No. 926, the Tax Guide for Household Employers.  It is pretty helpful.  I also suggest having a written contract with your nanny (translated into her native language as necessary), so that both of you are clear as to how the relationship will work and can resolve issues ahead of time.  Best of luck.
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