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Welcome to step 2 in our DIY Nanny Taxes series! By now, you should have applied for and received your federal employer ID number (EIN), had the conversation with your nanny about withholding taxes (and the benefits of doing so), and your nanny should have filled out a few pieces of paperwork.
Not ringing a bell? Head on over to step 1 to get started.
For a quick refresher, here's how we're laying out the information, so jump to the part of the process that makes sense for you.
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. 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. This is what we're going over today! We're walking you through how to get your federal tax ducks in a row, when and where to file, tax due dates, and giving you access to a free tax calculator.
Step 3: State Taxes: Tax Account Setup & Quarterly Filings. Arguably 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.
Ready to dive in?
DIY Nanny Taxes - How To File & Pay Taxes With the IRS
Let's step back for a second and give the thousand-foot summary of what we're looking at and why it's important.
Once you've hired a nanny and plan to pay him or her $2,300 or more for the year, you become a full-fledged employer with all the duties that come alongside it. The federal taxes you are required to pay include the employer's portion of employment taxes, which include Social Security and Medicare. You also will owe federal unemployment tax, which helps fund state unemployment programs, which your nanny will be eligible if his or her job goes away.
Your nanny is also responsible for the employee portion of Social Security and Medicare taxes, which you are required to withhold from your nanny's paycheck and send to the IRS. Most employers are also required to withhold federal income taxes from their employee's paychecks, but as a household employer this is optional. Your nanny is still required to pay them when filing his or her tax return in April, but they do not have to be withheld from each paycheck.
As for when you need to send the tax payments into the IRS, you're also given options here. You can choose to submit payments on the regular quarterly IRS payment schedule (listed below) or, since you're a household employer, you're given the option to pay all at once with your personal tax return.
Benefits to waiting to pay all at once after the end of the year? Saves you time each quarter and you only have to think about paying federal nanny taxes once. each year Downside? You may end up with a hefty bill you have forgotten about, especially if you haven't set aside funds to cover the taxes. Quarterly payments can keep the payments smaller and more manageable.
Here is a breakdown of federal nanny taxes & their due dates:
Social Security, Medicare, & FUTA tax (required)
Nanny's federal income tax withholding (optional)
Optional quarterly payment due dates:
Quarterly payment 1 (for wages paid between Jan 1 - Mar 31): Apr 15
Quarterly payment 2 (for wages paid between Apr 1 - May 31): Jun 15
Quarterly payment 3 (for wages paid between Jun 1 - Aug 31): Sep 15
Quarterly payment 4 (for wages paid between Sep 1 - Dec 31): Jan 15
Annual payment due date:
If you opt out of quarterly payments, your full tax (and the withheld taxes from your nanny's paychecks) will be due with your personal tax return on Apr 15. You will report the wages paid to your nanny and taxes owed on the Schedule H (we have a thorough guide on how to fill this out).
How to calculate your federal nanny taxes
Every time you pay your nanny, you'll need to make the following calculations:
Hourly rate * hours worked
Subtract federal income taxes to be withheld (optional)
Subtract state income taxes to be withheld (optional)
Subtract employee portion of Social Security & Medicare taxes (required)
Subtract local income taxes or other employee portions of state taxes like paid family or paid sick leave (if applicable)
This will all add up to your net pay amount that you'll pay your nanny.
In addition, you'll need to record the employer portion of applicable taxes and make a note of them for your state tax payments and optional quarterly payments to the IRS.
If you're hoping to DIY your nanny tax filings with a little help, we have a few tools that help make this net pay calculation a breeze - including a payroll portal and automatic paycheck generator that will record and track all payments made to your nanny and taxes due.
If you want to fully DIY your nanny taxes, use this calculator to calculate net pay and track your taxes due. Note this will not calculate income taxes, so if you intend to withhold state and federal income taxes for your nanny, you'll need to add those calculations.
How to pay your federal nanny taxes
Get set up with an Electronic Federal Tax Payment System (EFTPS) account. Once your account is set up, you'll be able to make all quarterly federal payments here.
If you're calculating nanny taxes on your own, add up the taxes due for the quarter, log into your EFTPS account, make the payment, and record the date and amount of the payment.
If you are using a service like Nanny Files, you can run a report for the quarter, which will show you exactly what is due to each agency. Log into EFTPS, make your payment, and forget about it until next quarter.
If you're skipping the quarterly payments and just paying all of your nanny taxes along with your personal tax return at the end of the year, jump to this Schedule H walkthrough for detailed instructions.
Ready for the next step?
Head on over to Step 3 to learn all about filing and paying employment taxes in your particular state.
Looking for a bit more help with the calculations? Check out what's included in our guided DIY payroll and tax plans.