First, let's try to break down each of the taxes that you are obliged to pay as a household employer. As you may know, you are automatically characterized as a household employer when you directly employ a nanny, babysitter, garden worker or any similar caregiver/worker and the work that is done is controlled by you. Also, in order to receive the identity of a nanny employer, you should pay wages of at least $1,800 or more during a single year. So now that we explained your identity as a household employer, let's see how the Nanny Tax is calculated.
First, we have the so-called Federal Unemployment Tax (FUTA). This component of the nanny tax is "activated" when you paid at least $1,000 during a single quarter, and it's capped at the first 7 grand of your nanny's total pay. It is calculated like this:
FUTA: 0.6%*Total Annual Pay (Capped at the first $7,000)
Also, there are taxes of Social Security and Medicare that both you and your nanny, or household employee in general, have to pay. The total tax for both you and your nanny's obligation is 15.3%. You have to option to choose either to pay your share (6.2% for Social Security and 1.45% for Medicare), which is the half amount, or pay the full amount in behalf of your nanny. Either way you are responsible to make sure that both your and your nanny's share are deposited to the IRS. So let's say as an example that a household employer chooses to only pay his share, then we calculate:
Social Security plus Medicare: 7,65% * Pay (Let's say your nanny is paid $100 per week. Then $7,65 of it should be withholded by the nanny for tax purposes, and you will also have to pay $7,65 of your own money to the IRS.)
Keep in mind that, depending on the specific state that you are residing in, you may be required to pay State Unemployment Tax. This tax rate (known as SUTA) is unique to each state, so the best thing to do is to ge tinformation directly from your specific state.
And that's pretty much it! Now you are fully protected and legal and can rest assured that you won't be having any surprise visits by the tax authorities.
In order to estimate the weekly total cost, including Employer's NI(National Insurance), please select your applicable net payment:
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