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?
A nanny is considered a household employee. A household employer only has to pay social security and Medicare tax only for the employee(s) that receive cash wages that exceed the threshold amount for the year. If the amount paid is less than the threshold, no social security or Medicare tax is owed. If social security and Medicare tax must be paid, you will need to file Form 1040, Schedule H (PDF), Household Employment Taxes. You must withhold the employee’s portion of the social security and Medicare unless the employer chooses 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 taxes. For directions on household employees, refer to Publication 926, Household Employer’s Tax Guide.
