How to Estimate Nanny Taxes
- 1). Determine whether you need to pay Social Security and Medicare taxes. If you paid cash wages to your nanny of $1,700 or more, as of 2011, you must pay these taxes, which are 13.3 percent of cash wages. Your nanny’s share is 5.65 percent, and yours is 7.65 percent. If you haven’t withheld 5.65 percent from your nanny’s paychecks, you are responsible for the full 13.3 percent at tax time.
- 2). If you withheld your nanny’s portion of taxes from her checks, multiply your nanny’s total yearly earnings by 0.0765. This is the amount of Social Security and Medicare tax you must pay. For example, if your nanny earned $10,000 in the tax year, you will pay $765 in taxes. If you didn’t withhold your nanny’s taxes, multiply her total earnings by 0.133 to find your total.
- 3). Determine whether you need to pay federal unemployment tax. If you paid cash wages of $1,000 or more to your nanny, you must pay federal unemployment tax. As of September 2011, this tax is 0.6 percent of cash wages for all wages under $7,000 per year.
- 4). Multiply your nanny’s total wages by 0.006. This is the amount of federal unemployment tax you must pay. However, wages over $7,000 are not taxed, so if your nanny earned more than $7,000, you must only pay $42 in federal unemployment tax.
- 5). Add the Social Security and Medicare tax with the federal unemployment tax amount, if both are applicable. This is the total amount of federal tax you must pay. Contact your state unemployment tax agency to see how much you need to pay in state unemployment taxes. Add this to your federal tax total for a grand total of the nanny tax you must pay.
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