Payroll & Taxes

✓ Register for federal and state tax accounts

✓ Complete and file a New Hire Report

✓ Calculate the correct amount of federal and state taxes to withhold each pay period

✓ Track gross pay, net pay, federal and state taxes withheld, and federal and state employer taxes

✓ Prepare state employment tax returns on a regular basis and remit employer and employee taxes

✓ Prepare 1040-ES vouchers and remit federal taxes to the IRS four times per year

✓ Prepare year-end tax forms (W-2, W-3, Schedule H and State Annual Reconciliation)

✓ Respond to IRS and state tax agency notices

✓ Written Notices (employment agreement, termination notice...)

✓ Wage & Hour Law Requirements (overtime, minimum wage... )

✓ Reimbursement for Mileage & Expenses

✓ Workers’ compensation insurance

When you hire a nanny or other household employee, you’re bringing a professional on board. They expect the same benefits and  protections of being paid legally afforded to those who work in an office, retail store, restaurant or other type of workplace. By  doing payroll and taxes the right way, you’ll pick from a larger pool of qualified candidates and have a better chance of finding the  right fit for your family. 

Your employee will appreciate the benefits and protections of being paid legally. They have a verifiable income and legal  employment history when applying for a loan, credit card or subsidy in the health insurance marketplace. Also, you and your  employee will be paying into their Social Security and Medicare accounts. By treating them like a professional, they have higher job  satisfaction. This leads to a happier family (especially the kids if you’re hiring a nanny!) and an easier work relationship with your  employee. 

Workers’ compensation insurance may be required for household employers in your state. The proper coverage ensures that some  of your employee’s medical costs and lost wages will be covered if they become ill or are injured on the job. Without it, your  employee can sue you for lost wages if they are hurt on the job and you don’t have the required coverage. 

It’s easy to get caught paying under the table. All it takes is your employee filing for unemployment after you part ways and listing  you as their previous employer. They’ll be denied benefits and you’ll come under scrutiny for not paying the proper taxes. Or, your  employee is injured on the job and goes to the emergency room. When they are asked how it happened, they mentioned it was at  work. The injury will be reported to your state’s workers’ compensation board, which means you’ll receive a hefty fine because  you’re noncompliant and don’t carry the required insurance coverage. 

Once the federal government realizes you haven’t been compliant with household employment law, your chances of being audited  skyrocket. The audit could just be a hassle if you’re not hiding anything else. However, you’ll likely need to pay back taxes or a fine  for paying your nanny “off the books.” According to The Motley Fool, failing to pay employment taxes can cost on average $25,000  in penalties and interest. 

Your employer’s Flexible Spending Account and/or Dependent Care Assistance Program and the federal Child and Dependent  Care Tax Credit can cover some of the qualified expenses associated with being a household employer.

All of these benefits lead to one major advantage … peace of mind. You’ll have a solid relationship with your employee and financial  protection. You won’t have to concern yourself with fines, penalties, audits or lawsuits. Even if you are audited for an unrelated  matter, you won’t have to worry about household employment raising red flags.