Legal Responsibilities of Nanny Employers

Disclaimer: This information is for educational purposes only and should not be considered professional legal or tax advice. 

Classification
Employer Taxes
Employee Taxes
Minimum Wage
Overtime
Worker’s Compensation
Pay Stubs
W-2
Auto Insurance If Using Employer’s Car
Mileage Reimbursement for Nannies That Use Their Own Cars
Following State Laws When Your Nanny Quits or Is Fired
Filing Forms and Submitting Taxes
Recommended Nanny Tax Experts

Classification
A household employer is defined as someone who pays an individual to perform duties in or around their home and has the right to control when, where, how or by whom the work should be performed. In short, all nanny employers are considered household employers. Which means that all nannies are employees, not independent contractors or business owners.  Get more information in IRS Publication 926 Household Employer’s Tax Guide.  

Employer Taxes
Household employers are required to pay the employer’s portion of Social Security and Medicare, federal and state unemployment taxes, and any additional taxes your state, country, or city imposes. You can expect for your employer taxes to be 9 to 11% of your nanny’s gross wages.

Employers are also responsible for withholding their nanny’s portion of Social Security and Medicare. Employers are not legally required to withhold income taxes however most employers do for the convenience of their nanny.

Employee Taxes
Employers are also responsible for withholding their nanny’s portion of Social Security and Medicare. Employers are not legally required to withhold income taxes however most employers do for the convenience of their nanny.

Minimum Wage
Under the Fair Labor Standards Act (FLSA), all nannies must be paid at least minimum wage for every hour worked. Some states have a higher minimum wage and in those states, the higher rate applies. More and more cities are passing local laws requiring a higher minimum wage and if you live in one of those cites, the higher rate applies. If you’re unsure of the minimum wage in your area, visit Homepay by Breedlove’s Requirements by State pages.

Overtime
The Fair Labor Standards Act (FLSA) requires that all LIVE-OUT nannies receive overtime for all hours worked over 40 in a work week. Some states have stricter overtime thresholds (e.g. overtime must be paid for all hours worked over 8 in a day) and in those states, the stricter threshold applies.

Some states also require that overtime be paid to LIVE-IN nannies. To get information about your state, visit Homepay by Breedlove’s Requirements by State pages.

Worker’s Compensation
In some states, employers are required to carry state sponsored worker’s compensation insurance. In other states, the employer has the choice of participating in the state sponsored program or finding a private carrier. Others states have no requirements at all. To find out what your state’s law is, visit Homepay by Breedlove’s Requirements by State pages.

Workers’ compensation laws are strict liability – fault and negligence by the employer doesn’t need to be established in order for the employee to collect benefits. In exchange for the assured benefits, the employee gives up her right to sue the employer for any injury covered by worker’s compensation laws.

If you’re not required to participate in your state’s program, I STRONGLY encourage you to purchase a private policy.  Homepay by Breedlove works with an exclusive insurance partner that writes stand-alone worker’s compensation policies at competitive rates.  For more information, visit their site.

Pay Stubs
Employers are required to provide their nanny with a pay stub each pay period. The information employers have to provide varies by state, however employers should provide basic information like gross earnings for the pay period, a breakdown of withholdings, and year-to-date earnings.

W-2
All employers must provide their nanny with a W-2 at the end of the year. (Technically it must be postmarked by January 31st of the year following the earnings.) Because nannies are employees and not independent contractors, employers must provide them with a W-2 and not a 1099.

Auto Insurance If Using the Employer’s Car
If a nanny is using her employer’s car during work hours, she should be listed as an additional driver on the policy. That isn’t simply giving the nanny permission to use the car. It’s contacting the agent and providing the nanny’s name, address, and driver’s license number so she can be added as a regular driver.

Mileage Reimbursement for Nannies That Use Their Own Cars
In many states, a nanny is legally entitled to the IRS mileage reimbursement rate for every mile she drives on the job when using her own car. This reimbursement covers the full cost of operating the car including gas, regular maintenance, and repairs. The rate for 2017 is 53.5 per mile, down from 54 cents per mile for 2016.

Following State Laws When Your Nanny Quits or Is Fired
Some states have specific laws around when you must provide your nanny with her last paycheck and if and how much accrued paid time off must be paid out when you fire your nanny or she quits. For more specific information, check with one of the recommend nanny tax companies.

Filing Forms and Submitting Taxes
Paperwork is a critical part of being a nanny employer. There are both federal and state forms to be filed, when hiring your first nanny and regularly after that, and of course taxes to be paid. Because federal regulations are often changing and each state has their own requirements, I strongly suggest you contact a nanny tax company for help with the paperwork. They can help get you set up and if you want continued support, file the regular paperwork for you.

Recommended Nanny Tax Experts
Partnering with the right nanny tax company can save you a huge amount of time and hassle when it comes to paying your nanny legally. But there are lots of tax companies out there and they’re not all created equal. I highly recommend 2 companies: Homework Solutions and HomePay provided by Breedlove. I’ve worked with both of them for over a decade and they offer clients real nanny tax know how and top notch customer service.

(Disclosure: I’m enrolled in both companies’ referral program. However I was referring them long before now. I wouldn’t suggest them to you if they didn’t offer a great service!) Both companies offer you a free phone consultation (and HomeWork Solutions offers a free, no obligation start-up package) so give them a call and get all your nanny tax questions answered. Let them know you heard about them through NannyFAQ.

HomeWork Solutions

 

 

 

 

800-626-4829 or visit the HomeWork Solutions
HomeWork Solutions has been in business for over 20 years and and for good reason. They offer parents 3 different nanny tax solution packages from a full service option to a DIY with expert guidance option. They have an excellent team of tax specialists available to their clients and are known for their great customer service.

HomeWork Solutions is offering a special deal valued at $100 to any parent referred by me. And the deal is yours even if you choose not to use their services. Mention NannyFAQ and you’ll get:
• free payroll analysis: determines your nanny’s payroll deductions and your tax obligation and budget
• free registration with taxing authorities to establish employer accounts
• free New Hire Reporting – a legal requirement of all U.S. employers

HomePay by Breedlove

 

 

 

888-273-3356 or visit the HomePay by Breedlove
Breedlove is the nanny tax expert for many of the nation’s top placement agencies and was purchased a few years ago by Care.com. Their name and website have changed but their staff and commitment to offering a great service have not.

They offer employers a super easy solution to all their nanny tax issues. Their ultra user-friendly website along with their responsive and well trained staff means you’ll always have the help you need. Check out this video for a quick walk through of how they can help you.