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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:

A nanny is considered a household employee, and you are a household employer:

  • A household employer only withholds and pays social security and Medicare taxes if cash wages paid to an employee exceed the threshold amount for the year.  See Publication 926, Household Employer's Tax Guide.
  • If the amount paid is less than the threshold, no social security or Medicare taxes are owed.
  • You must withhold the employee's share of social security and Medicare taxes unless you choose to pay both the employee's share and the employer’s share. The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's share is 7.65%.
  • You may also be responsible for paying federal unemployment tax.  Federal unemployment tax is not withheld from your employee’s wages.  
  • You are not required to withhold income tax from your employee’s wages.  However, you and your employee may agree for you to withhold income tax from their wages.
  • If social security and Medicare taxes or federal unemployment taxes must be paid, 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 employee.
  • 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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