9 Year-End Tasks for Families
If you hire a nanny, babysitter or other type of caregiver, learn about your end of the year responsibilities.
The holidays and the end of one year and the dawning of the next bring all kinds of excitement. In the midst of all the craziness, take a few minutes and check off all of your end-of-the-year tasks so you're organized for the new year. If you have a nanny, babysitter, senior care aide, housekeeper, pet sitter or other type of caregiver, that includes any of your duties as a household employer.
Follow this list so you don't forget anything!
Talk About Vacations
Make sure you discuss any holiday vacation time with your caregiver. What days will your caregiver want to take off and will you need to hire backup care? If you're planning a vacation, will you still need your caregiver to work? Although it should be in your contract, make it clear if her vacation time is paid or unpaid.
Learn more about to Handle Nanny Vacations, Holidays and Sick Days.
Dole Out End-of-Year Bonuses
Most full-time household employees receive a holiday bonus of one to two week's pay, but you can also give one week's pay and a nice gift. Have your family help pick out a basket of goodies and don't forget to thank your caregiver for everything they do.
Find the average nanny Christmas bonus in your state.
Report a New Hire
When you hire a new employee -- no matter how much you pay that person, you should file a new hire report. If you forgot to file the form, you still have time. Just make sure you do it before the end of the year. Most states will accept a completed W-4 form for registration purposes.
Prepare and Distribute the W-2
If you paid your caregiver $2,100 or more during the year, you are responsible for providing them with a W-2, which reports wages and taxes paid throughout the year. You have until January 31st to give your caregiver their W-2, which allows you a full month to make sure all the information on the form is correct.
Complete Your Year-End Household Employment Returns
Prepare the fourth installment of Form 1040-ES to account for the remainder of last year's federal Social Security and Medicare taxes (employer and employee portions), federal unemployment tax (FUTA) and any federal income taxes withheld from your employee's pay. Next, fill out the Schedule H, the form for reporting household employment taxes for the year. It needs to be included with your personal income tax return. Lastly, check with your state (usually your Department of Revenue or Department of Labor) to see when your state income tax and unemployment insurance tax returns must be filed. Your state may also require an Annual Reconcililation form. Check the details in your state for details.
Correct Any Mistakes that Were Made Last Year
"Families sometimes think that if they haven't withheld and paid employer taxes during the year, it's too late to make up for it," says Tom Breedlove, director of Care.com HomePay. "But the truth is, you can go back and correct this mistake before taxes are due, with minimal penalties from the state and federal tax agencies."
You still have time to pull together a Form W-2 and file quarter state tax returns for the past year. Talk to your caregiver about how her paycheck will change once taxes start coming out. Use the nanny tax calculator to help you both see the numbers. If you're confused, call Care.com HomePay for help: (888) 273-3356.
Look Into Tax Credits
If you had a nanny last year, you may be are eligible to take a tax credit on the wages you paid them. "The child care tax credit can save families up to $600 if they have 1 child or $1,200 if they have 2 or more kids," says Breedlove. "That can offset a significant portion of a familys tax liability".
Review Your Insurance
Check with your insurance agent to make sure you have the needed home and auto coverage, especially when you employ household staff like a nanny. Umbrella liability policies protect against accidents in your home that aren't employee related, but workers' compensation covers employee injuries.
"Workers' compensation is like most insurance policies; you hope you never need it, but when you do, it's worth its weight in gold," says Breedlove.
Set Up a Post-Holiday Review
The new year is a great time to discuss goals, responsibilities or even just to hear from your nanny, says Bugbee. Before the end of the year, schedule a time in January to have coffee and informally discuss what she is doing well or changes you would encourage. This doesn't have to coincide with a performance review -- it can be a "moving forward" idea session. Schedule her yearly review (with any pay raise discussions) at regular six-month or one-year intervals.
* The information contained in this article should not be used for any actual caregiver relationship without the advice and guidance of a professional advisor who is familiar with all the relevant facts. The information contained herein is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for your specific circumstances and may require consideration of other matters.
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