Tipsheet: Setting Up a Nanny Payroll

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Tipsheet: Setting Up a Nanny Payroll

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Home \ 10 Tips Series \ Tipsheet: Setting Up a Nanny Payroll

Ten Tips for Setting Up Nanny Payroll

Additional Resources

Download W-4 Form

Download I-9 Form

Put the compensation details in writing. Your nanny is your employee and it is important to document the financial agreement to protect BOTH of you. You should document a base weekly pay based on specified days/hours of employment and put the wage in HOURLY wage terms for FLSA compliance.
State payroll frequency. Will the nanny be paid weekly, bi-weekly or semi-monthly? What day is pay day? Be careful - as non-exempt employees, many states have established stringent minimum payroll frequency regulations.

Detail payroll deductions (if any). You are entitled to deduct the employee portions of Social Security and Medicare taxes from the nanny's payroll. You ARE obligated to make remittance (pay) BOTH the employee and the employer contributions to Social Security and Medicare whether you deduct it or not. Deducting your employee's income taxes is optional. Most employers of full time household staff offer to do this for the employee. See our Paycheck Calculator to compute the income taxes.
Require that the nanny keep a time card. The FLSA requires employers to maintain accurate and complete contemporaneous time tracking records for all hours worked by an employee. This does not have to be complicated. Many families require that the nanny keep a daily Nanny Log and simply use this to track time and expenses too.
Obtain completed Forms W-4 and I-9 from your employee. These forms are legally required and should be kept with your permanent employment records. The W-4 will provide you the nanny's particulars for tax filing, including legal name, address and Social Security Number.
Immediately obtain a Federal Employer Identification Number. This number is required for all Federal tax reporting, and most state tax agencies require this number as part of your state registration process.
Research and apply for a state unemployment tax account, and state withholding tax account if you are deducting the nanny's state income taxes. Timely registration and filing with your state will avoid late filing penalties and will qualify you for the most favorable unemployment tax rate.
Comply with Federally-mandated state new hire reporting. Federal legislation mandates that all states implement and manage New Hire Registration Programs to track individual employment data for purposes of expedited child support enforcement and fraud control of various welfare programs. New Hire Reporting is discussed in more detail here.
Research Workers Compensation Insurance requirements. Worker's Compensation Insurance help is found here. Penalties for not securing a policy promptly, if required, will cost you hundreds, if not thousands, of dollars.
Familiarize yourself with tax reporting schedules and requirements. While some tax reporting is done on an annualized basis, most state reporting is done quarterly. Occasionally, some employers are required to make some state reports and payments on a monthly basis. Services such as HomeWork Solutions' NaniTax and NaniPay are popular because they allow you to outsource much of the tax related paperwork. This allows you to focus on your family, your nanny relationship, and your career with the confidence that trained professionals are supporting your payroll tax obligations.

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