Reply to Do you pay on top of salary for Medicaid and Social Security?

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[quote=Anonymous][quote=Anonymous]Normally, you'd pay about 7% on top of the paycheck for FICA and withhold 7%. Essentially, she's asking for 7% more salary then you are offering. If you fine with that, my personal preference would be to just increase her pay rate and withhold in the usual manner. There is a special exception for household employees,however, where you can do it as she asks.

My larger concern would be that she's not entirely comfortable being paid legally. This can translate into upset when you submit her W-2 and/or need other information from her for any childcare tax benefits. I would try to explore if this is the case as well.[/quote]

You are not exempted from FICA -- she cannot pay that herself legally. You are exempted from federal and state income taxes if she wishes to pay them herself.

If you "gross up" her paycheck (give her back the 7.65% you withhold), you have to count that 7% as additional income, so the calculations will change somewhat.

If she is not asking you to withhold income taxes, I would probably ask her what her "take home" rate is, and then decide if I want to work with that.

For example, if she wants to "take home" $16/hr, that would mean she is effectively making about $17.50/hr base rate to account for the FICA tax. You will also pay your portion on the $17.50 amount, not the $16 amount.[/quote]

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