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Forms 940, 941 and 944 Employment Taxes

Question: We hired a nanny to look after our baby while we work. How do we pay her Social Security taxes and properly report her income?

Answer:

Your nanny is considered your household employee and you are her household employer:

  • As a household employer, you only withhold and pay Social Security and Medicare taxes if the cash wages you paid her exceed the threshold amount for the year. See Publication 926, Household Employer's Tax Guide.
  • If the amount paid is less than the threshold, you do not owe Social Security or Medicare taxes.
  • If the amount paid is more than the threshold, you must withhold your employee's share of Social Security and Medicare taxes unless you choose to pay both her share and your share. The taxes are 15.3% of cash wages. Your share is 7.65% and her share is 7.65%.
  • You may also be responsible for paying federal unemployment tax. Federal unemployment tax is not withheld from employees' wages.
  • You are not required to withhold income tax from her wages. However, you and your nanny may agree for you to withhold income tax from her wages.
  • If you must pay Social Security and Medicare taxes or federal unemployment taxes, or if you withhold income tax, you will need to file Schedule H (Form 1040) (.pdf), Household Employment Taxes. You may also need to file a Form W-2 (.pdf), Wage and Tax Statement, and furnish a copy of the form to your nanny.
  • If you choose to pay your household employment taxes with your business or farm employment taxes, you must include your household employment taxes with those other employment taxes on Form 941 (.pdf), Employer’s QUARTERLY Federal Tax Return, Form 944 (.pdf), Employer’s ANNUAL Federal Tax Return, or Form 943 (.pdf), Employer’s Annual Federal Tax Return for Agricultural Employees, and on Form 940 (.pdf), Employer’s Annual Federal Unemployment (FUTA) Tax Return.

Additional Information:


Category: Small Business, Self-Employed, Other Business
Subcategory: Forms 940, 941 and 944 Employment Taxes

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
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