Welcome to the first post in our DIY Nanny Taxes series! I'm so excited to bring this super detailed, step-by-step information to you. I promise this will not be a high-level overview of nanny taxes - this will give you everything you need to get set up with tax accounts, track your nanny's wages, and file your household employment tax forms.
Here's a quick look at how we'll break down the information.
Step 0: If you're not sure whether or not you need to file household employment taxes (aka "the nanny tax"), check out our post to help you figure it out. This will also tell you which taxes you'll be responsible for based on how much you pay your nanny throughout the year.
Step 1: Getting Started. This is where you are right now! We'll be breaking down exactly what you need to do to get started with easy-to-follow instructions - we'll even give you an interactive checklist where you can mark off the steps as you complete them. We'll get you some quick wins in just a few minutes!
Step 2: Federal Taxes: IRS Filings and Payments. We'll walk you through how to get your federal tax ducks in a row, when and where to file, tax due dates, and a tax calculator.
Step 3: State Taxes: Tax Account Setup & Quarterly Filings. In my opinion, this is the most complicated part of the whole nanny tax process. We'll walk you through where you can get all the information you need to set up your state tax accounts and file your quarterly employment taxes.
Step 4: Year-End Tax Filings. We'll break down every form you need to file as part of your year-end tax process. Hint: nanny tax forms are filed along with your personal taxes in April, so keep that timing in mind.
Bonus: Step-by-Step Schedule H Instructions. We actually tell you what to include on every box of the Schedule H form, which is filed with your personal taxes (Form 1040) in April. This is an add-on bonus post to the Step 4 year-end tax filing instructions.
Feel free to skip around and check out steps further along in the process if you already have the basics down. Our goal is to make nanny taxes approachable and easy for families that don't want or need to pay a full-service payroll company thousands of dollars to run nanny payroll for them!
Without further ado...
DIY Nanny Taxes: Getting Started
Now that you're familiar with the concept of nanny taxes and why they're owed (if you missed that, check out our guide to nanny taxes), let's get to work getting our accounts set up and our paperwork in place.
As a first step, open up our Nanny Tax Setup Checklist, click "File --> Make a copy" so you can start tracking your progress. Full disclosure - we provide a few paid tools to help make DIY nanny taxes even easier for our members (including a payroll portal and visual guides), so there are a few sections in the checklist that will only be applicable to our members. But I'll identify the sections we'll be working through in this post, and you'll definitely be able to work through everything we talk about using our free info.
Let's start with getting all things nanny-related organized. Scroll to the "Your Nanny" section of the checklist and we'll work from there.
If you've already hired your nanny - great! Hopefully he or she is already aware that Social Security (FICA) and Medicare taxes will be withheld from each paycheck. If you're concerned that your nanny doesn't want to pay taxes, we have a free handy guide to help you have the conversation.
No nanny yet? You may want to reference this post to determine how much you can pay your nanny and how that will fit into your family's budget. Ready to hire? Use our free nanny contract template to get all the nitty gritty details in writing.
Once you've hired your nanny, run a background check (we like this service) and provide blank copies of these documents for him or her to fill out prior to the first paycheck.
State equivalent of the W-4 Form (if applicable, check your state's revenue department for a copy)
You may also want to have your nanny log hours in a time tracker to make adding up payroll hours easier at the end of the week. Here is a free option our members like.
One other really quick thing you can do to get started is to apply for your federal Employer Identification Number (or EIN). You'll hear about this a lot and will need it to apply for state tax accounts and file your federal employment taxes. This won't take you more than 5 minutes - we even recorded a quick video to walk you through every step.
Not too bad, right? If you're ready to move on, head over to Step 2: Filing & Paying Federal Taxes to keep the ball rolling.
Interested in some of the illustrated guides and payroll features our members have access to? You can learn more about our plans here. Questions about getting set up? Drop us a line at firstname.lastname@example.org. See you in Step 2!