Nanny Tax

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Dictionary Says

Definition of 'Nanny Tax'

A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total of more than a specified threshold amount during the tax year. The reason the IRS charges the nanny tax is because it considers an ongoing household helper to be the taxpayer's employee. As such, the taxpayer becomes an employer and must pay Social Security, Medicare and federal unemployment taxes on the wages paid to that employee. There may be state-level nanny taxes as well.
Investopedia Says

Investopedia explains 'Nanny Tax'

The nanny tax does not apply if the babysitter is the taxpayer's parent, spouse, or if the babysitter is under 18 and is not primarily engaged in the household employment profession. Another way for taxpayers to avoid dealing with the nanny tax is by hiring household help through an agency. The agency will then be the employer and be the one who pays the nanny tax. Also, if household helpers are officially self-employed, they will be responsible for paying their own taxes and the taxpayer will not have to worry about the nanny tax.

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'Nanny Tax'

  • New Baby, New Tax Break - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0110/New-Baby-New-Tax-Break.aspx
    ... some questions about how to make use of these credits, check out our FAQ: How can
    I use a child tax credit?). One important note: If you hire a nanny and pay ...

  • Returning To Work: Is It Right For You And Your Family?

    http://www.investopedia.com/articles/pf/09/returning-to-work.asp
    ... As an employer, you will be responsible for paying the required Social
    Security and federal income tax on your nanny's salary. If ...

  • Benefits Of A Dependent Care Flexible Spending Account

    http://www.investopedia.com/articles/pf/09/dependent-care-fsa.asp
    ... Qualified expenses include: Physical care; In-home care, such as a nanny or au ... Before
    setting up a dependent care FSA, compare its potential tax benefits with ...

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