What every nanny needs to know about taxes and payroll
You finally landed a great nanny job. You get to bond with a new family, plan lots of playtime and, oh yeah, collect a paycheck, too! We all love payday, but it’s also good to know before your first paycheck arrives what you can expect to see when it comes to gross pay and taxes.
Once you’re hired by a family to be a nanny in their home, they become your employer and are responsible for making sure you're paid correctly. Just like any other job you’ve had in the past, that means taxes are involved, and you're eligible for the benefits you deserve.
“With my pay stubs, I was able to rent a home,” says Rebecca Schuman, a nanny in Las Vegas, Nevada. “I work for an amazing family who truly cares about me and loves me as their nanny.”
Most of the payroll and tax process doesn't require any work on your part as the employee, but it’s still important for you to understand. To make sure you're on the same page as the family, here's an overview of the tax process — from your hire date through the end of the tax season and beyond.
What to expect when you’re hired
Before you receive your first paycheck at your new nanny job, the family needs to know how to handle your payroll. The only way this is done correctly is if the proper amount of taxes are being withheld. It’s up to you to fill out a worksheet called Form W-4, which will tell the family how much in federal income taxes to withhold. If you live in a state that has income taxes, you will probably also have to fill out a state withholding form.
For your convenience, Care.com HomePay has a tutorial for how to fill out a W-4 if you need help.
What to expect during the year
Once your payroll has been set up, you shouldn’t have to do anything the rest of the year. However, if you feel that too many or too few taxes are being withheld, you can change the allowances on your withholding forms at any time. Remember that lowering the number of allowances will withhold more income taxes from each paycheck, and a higher number of allowances will withhold less income taxes each paycheck.
You can always run a pay scenario using a Paycheck Calculator to see how increasing or reducing your allowances will affect your pay. This way, you don’t have to commit to the change without first seeing the results.
The family will send the IRS the taxes they’re withholding from you to the IRS and the state throughout the year — along with some additional taxes they’re responsible for paying. By doing this, your employers are not only following tax guidelines on their end, but they’re also making sure you don’t end up with a large tax bill when you file your tax return.
What to expect at the end of the year
When the calendar year ends, the family will gather all your payroll information and prepare a W-2 for you. The W-2 itemizes your gross wages for the tax year, along with all your federal and state tax withholdings. You should receive your W-2 by the end of January, giving you plenty of time to prepare your income tax return before the April 15 deadline.
One very important thing to remember is that if you lose your job or quit during the year, it is up to you to make sure the family has your current mailing address so they can send your W-2 to you on time. Without it, you can’t file your taxes.
What to expect down the road
By the end of February each year, your employer will also have filed paperwork with the Social Security Administration on your behalf. The Social Security and Medicare taxes the family withheld from you throughout the year — along with a dollar-for-dollar match from your employer — will act as credit so you’re eligible for Social Security and Medicare benefits when you retire. The greater your contributions are, the more you'll receive during your retirement years.
Most people look forward to payday but don’t really like to think about taxes. It's important, though, to understand the payroll process and the benefits you receive as a result.
Read next: How to build your nanny network