Home / Blog

Understanding the Nanny Tax: Is It Applicable to You?

If you have hired a caregiver and paid them over $2,100 in a year, you may be subject to the Nanny Tax. The Nanny Tax refers to the tax obligations that arise when employing a caregiver or nanny. In this blog post, we will explain the requirements of the Nanny Tax, including the provision of a W-2 form, obtaining an Employer Identification Number (EIN), completing the I-9 form, and how Wagefiling can simplify the process of preparing and e-Filing the necessary documents.

Nanny Tax Requirements:

  1. Providing a W-2 Form: If you paid a caregiver over $2,100 in a year, the IRS requires you to provide them with a W-2 form by January 31st. This form reports their wages and taxes withheld.
  2. Using a Service: If you utilize a service that provides workers, such as a nanny agency, they may handle the tax obligations on your behalf. It’s important to clarify with the service provider whether they will handle the necessary tax filings.
  3. Obtaining an EIN: If you don’t already have one, you will need to obtain an Employer Identification Number (EIN) from the federal government. The EIN is used to identify your household as an employer for tax purposes. You can apply for an EIN online through the IRS website.
  4. Completing the I-9 Form: To properly report wages and comply with employment regulations, you will need to obtain a fully completed I-9 form from the caregiver. The I-9 form verifies their eligibility to work in the United States, and you should also verify their Social Security Number (SSN).

Simplified Process with Wagefiling:

Wagefiling provides a convenient solution for handling the Nanny Tax obligations. Here’s how Wagefiling can assist you:

  1. Create W-2 Forms: Using Wagefiling, you can easily generate accurate W-2 forms for your caregiver. The platform simplifies the process and ensures compliance with IRS requirements.
  2. Print Plain Paper Copies: Once the W-2 forms are created, you can print plain paper copies to provide to the recipient. This allows for easy distribution of the necessary documents.
  3. e-File with Ease: Wagefiling takes care of the e-Filing process for you, ensuring that the W-2 forms are submitted to the IRS on time. This saves you the hassle of navigating the filing process independently.

The Nanny Tax applies to individuals who have hired caregivers and paid them over $2,100 in a year. To comply with the tax obligations, it is necessary to provide a W-2 form, obtain an EIN, and complete the I-9 form. Wagefiling simplifies the process by allowing you to create W-2 forms, print plain paper copies for recipients, and handle the e-Filing to the IRS. By utilizing Wagefiling, you can ensure compliance with the Nanny Tax requirements with ease and convenience.