Nanny Tax Timeline: What to Do When

nanny tax timeline

Hiring a nanny often lifts a huge burden off your shoulders. You have someone reliable and likeable to care for your children when you are not there, and your family life becomes a little more settled.

And having her taxes in line is another huge relief. Knowing you're doing everything ethically and legally can also help you sleep at night.

Many people don't know that nannies aren't considered independent contractors in the eyes of the IRS. Read our article about why they are classified as household employees »

Having a household employee does mean a little extra paperwork to make sure all the taxes are paid on time and correctly. After the rush of hiring is over, you'll settle into a routine of federal and state tax payments that will soon be as habitual as paying your own taxes.

To help you keep track of everything, we asked Stephanie Breedlove, VP of Care.com HomePay, to give us pointers on establishing a schedule for your nanny taxes, including the quarterly taxes that will prevent any underpayment penalties.

We put together this handy month-by-month guide to make sure you don't miss a thing. Keep this chart posted to remind you of your monthly tasks.

When You Hire
No matter what month you hire a nanny, you need to take care of a three things during that month and not wait until tax time.

  1. Eligibility. First, make sure your employee is able to legally work in the United States. Have your nanny fill out an I-9 form, an employee eligibility verification form that shows they are able to legally work in the United States. She also needs to complete a W-4 form to choose her income tax withholding selection.

  2. File a report. File a new hire report with your state's new hire registry. According to the IRS, most states accept a completed W-4 form for registration purposes. You generally have 7 to 14 days to file this form, said Breedlove.

    Tip: Download your state forms from your state's official website and your federal forms from IRS.gov/Forms&Pubs.

  3. Become a household employer. You need to establish yourself as a household employer, said Breedlove, so you must file all the paperwork that goes with that. In most states, you will need to set up two state tax identification numbers and one tax number with the IRS. The two state numbers are for state unemployment insurance and state income taxes withheld from your employee's pay. The federal government requires a federal employment identification number (FEIN or EIN).

Your Month-by-Month Nanny Tax Plan

January

15 File Form 1040-ES.The fourth installment of last year's federal Social Security and Medicare taxes(employer and employee portions), the federal unemployment tax (FUTA) and any federal income taxes withheld from your employee's pay are due today.

31 Start the year off right by assembling Copies B, C and 2 of Form W-2, Wage and Tax statement and preparing them for your nanny.

31 Quarterly state income and unemployment taxes are due no later than today for the quarter that ended on December 31. (Some states require filing by January 15 -- check your state's website for forms and dates.)

February

15 Ask for a new Form W-4, Employee's Withholding Allowance Certificate, from each employee who claimed exemption from income tax withholding last year.

28 File Copy A of Form W-2 (or W-3 if you have more than one employee) to the Social Security Administration (if filing electronically, you have until April 1).

March

Stay on track this month and be sure to check updates to labor laws and tax rates so you continue to file accurate returns. This is a good time to assemble a file with your employee's information (including address, social security number,marital status, dates of employment, etc.) and your employer identification number.

April

1 File Copy A of Form W-2 electronically with the Social Security Administration by today.

15 State and federal income tax returns are due today. File Schedule H (Form 1040), Household Employment Taxes, with your federal income tax return (Form 1040, 1040NR, 1040-SS, or Form 1041). If you do not have to file a return, file Schedule H by itself. The Schedule H lists all the wages paid to your employees. You also need to file the annual FUTA (Federal Unemployment Tax Act) taxes with the 1040 (but we know you have been keeping up with quarterly payments all along!).

15 File Form 1040-ES. The first-quarter installment of current year's federal Social Security and Medicare taxes (employer and employee portions), the federal unemployment tax (FUTA) and any federal income taxes withheld from your employee's pay are due today.

30 Quarterly state income and unemployment taxes are due no later than today for the quarter that ended on March 30. (The deadline is earlier in some states -- check your state's website for forms and dates.)

May

Nothing is due this month, but stay on track and check updates to labor laws and tax rates so you continue to file accurate returns.

June

15 File Form 1040-ES. The second-quarter installment of current year's federal Social Security and Medicare taxes (employer and employee portions), the federal unemployment tax (FUTA) and any federal income taxes withheld from your employee's pay are due today.

July

31 Quarterly state income and unemployment taxes are due no later than today for the quarter that ended on June 30. (The deadline is earlier in some states -- check your state's website for forms and dates.)

August

Another filing free month! Track those changes to labor laws and tax rates so you continue to file accurate returns.

September

15 File Form 1040-ES. The third-quarter installment of current year's federal Social Security and Medicare taxes (employer and employee portions), the federal unemployment tax (FUTA), and any federal income taxes withheld from your employee's pay are due today.

October

31 Quarterly state income and unemployment taxes are due no later than today for the quarter that ended on September 30. (The deadline is earlier in some states -- check your state's website for forms and dates.)

November

30 If your nanny's marital status has changed in the past year, or if she plans to change her withholding allowance in the coming year, remind her to submit a new Form W-4 by today.

December

Enjoy the deadline-free month to organize end-of-year paperwork and catch up on any tax and legal changes. Begin next year's tax folder so you have a fresh start.

Taxes are one place where being organized will pay off in a big way. On-time payments will keep you from having to pay unnecessary fees or penalties and you will gain peace of mind when you know you are filing correctly.

Your Next Steps:

* The tax information contained in this article should not be used for any actual nanny relationship without the advice and guidance of a professional tax 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.

    For more tips and advice, check out these Nanny Tax Articles.

    16 Comments

    Join the conversation

    Comment
    Photo of Tom B.

    Tom B.

    Hey Kodi. You should go back and withhold on those first $1,600. Since it's a pretty small amount, it shouldn't be too much of an inconvenience for you or your nanny.
    June 02, 2015 at 12:07 PM
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    Kodi N.

    I hired a part time nanny in April and now realize I should've been withholding. Where do I start at this point. Her YTD earnings are around $1600.
    May 21, 2015 at 12:28 AM
    Photo of Tom B.

    Tom B.

    Hello Rachel. No, you should not issue a 1099 to your nanny. That actually misclassifies her as an independent contractor, which is a tax no-no. Instead, your nanny will claim the wages you paid her as Other Income on line 7 of her 1040 with the letters "HSH" to designate household employment income.
    January 16, 2015 at 12:47 PM
    Photo of Rachel G.

    Rachel G.

    I paid my nanny less than $1000 this past year in one quarter. I know I don't need to submit a W-2 for her but do I need to issue a 1099 instead?
    January 15, 2015 at 9:50 PM
    Photo of Tom B.

    Tom B.

    Hey Dan. The IRS and the state actually do require both families to pay unemployment insurance taxes. This is because each family in a nanny share is considered a separate employer, which is also why both families have to establish their own EIN as you mentioned. But the good news is, since you're splitting the nanny's wages, you'll also split the unemployment insurance taxes, so the financial burden is minimal.
    January 13, 2015 at 12:49 PM
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    Dan S.

    If I am doing a nanny share, I understand that we both should establish EINs and pay SS/Medicare/State taxes. However, do we both have to pay federal and state unemployment taxes? That seems wrong or at least unfair.
    January 10, 2015 at 11:34 PM
    Photo of Tom B.

    Tom B.

    Hello Jennifer. I'm Tom Breedlove, Director of Care.com HomePay and I can help you with your question. In reading your question, it seems you live in a state that does not have income taxes. In that case, yes, the only quarterly filing requirement you'll have is your state unemployment taxes. While it's not explicitly required for you to follow the 1040 Estimated Payment schedule, I would recommend it because it's possible that holding over the entire tax liability could result in underpayment penalties for you. I would recommend speaking to your income tax preparer though because it's possible you could get by without making Estimated Payments.
    November 04, 2014 at 12:59 PM
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    Jennifer L.

    Hi Stephanie, I just hired a nanny in the last quarter and just paid my state quarterly unemployment taxes. Am I correct that those are the only "quarterly" taxes due? My employee's withholding, employee FICA, employer FICA and federal unemployment taxes are all filed with a Schedule H (1040) by April 15? I can pay estimated taxes and file a 1040 ES if I want the tax burden to be less, but these are not required? Do I understand this all correctly? Thank you for your help! Jennifer
    November 03, 2014 at 5:34 PM
    Photo of Stephanie B.

    Stephanie B.

    Hi Diana! You probably have the most in-depth, technical question I've seen on Care.com and I'm really happy to see you're putting in the effort to do things correctly :) To answer your question, the reason why the IRS didn't see your tax payments is because only in rare circumstances can household employment taxes be placed on a 941. The IRS isn't really set up to match up your 941 returns to your Schedule H because the 941 is generally used for businesses - whereas your household employment tax liability is reconciled on your personal income taxes. You did the right thing by alerting the IRS on your 941-X that the estimated payments for 1st quarter should be rolled over to your future 1040-ES schedule. That will allow them to be on the lookout for future 1040-ES vouchers from you. Even though it's late, you can still send in 1040-ES #2 if you'd like, or wait until 1040-ES #3 is due on October 15. The odds of the IRS penalizing you for a late voucher that offsets your yearly tax liability is pretty low and honestly the same odds would apply if you waited another 3 months to roll over 1040-ES#2 with 1040-ES#3. I hope I've answered your question thoroughly enough Diana, but if not, please respond and I'll help clarify.
    July 11, 2014 at 12:06 PM
    Photo of Diana R.

    Diana R.

    When we first hired a nanny we had a local CPA handle our first filing and she had us submit estimated tax payments using Form 941 and our the EIN we set up as a household employer. Unfortunately, when we filed our 1040 and Schedule H the IRS never saw the payments ties to our EIN and said we still owed taxes (which equaled the exact amount of the estimated taxes we'd submitted with our Form 941s) Upon calling the IRS, the IRS agent told us to file Form 941-X for each of our 2013 quarterly 941 payments and our 1st Qtr 2014 941 payment and to tell the IRS to roll over each payment to our SSN (which we did). We are now getting ready to file our 2nd quarter estimate tax payment and just discovered that the deadline for the Form 1040ES 2nd Qtr (June 15) is not the same as the deadline for the Form 941 2nd Qtr (July 31). Can we still go ahead and file our 2nd quarter estimated taxes on Form 1040ES or should we wait and file them with the 3rd quarter payment? Our inclination is to go ahead and file now even though it's 3 weeks late due to the different timeline. Any suggestions would be appreciated. Thanks.
    July 10, 2014 at 5:36 PM
    Photo of Stephanie B.

    Stephanie B.

    Hi Christina! Personal assistants and companions are still considered household employees because you're still working in the family's home performing duties they assign to you at times they designate. Since the majority of the questions on these article do tend to focus around nannies, I completely understand why you'd be unsure. Good luck on your new job!
    April 23, 2014 at 11:28 AM
    Photo of Christina R.

    Christina R.

    Hello, If I am an assistant or companion (not involving children)for a potential employer am I considered a sub contractor? I would do computer work, errands, and household tasks. I would also help potential employer with her aunt that lives in a facility. I would be working in California? Thank you, Christina
    April 23, 2014 at 10:02 AM
    Photo of Stephanie B.

    Stephanie B.

    Hi Rachael! When you send in your 1040-ES forms, you'll use your Social Security Number. This is because your federal tax liability as a household employer is reconciled through your personal income tax return via Schedule H. So as long as the IRS has your SSN, you're good to go.
    April 11, 2014 at 11:10 AM
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    Rachael

    When filing the 1040-ES each quarter, should I use my social security number, or the EIN I applied for as a household employer?
    April 10, 2014 at 10:33 AM
    Photo of Stephanie B.

    Stephanie B.

    Hi Alison! My name is Stephanie Breedlove and I'm the VP of Care.com HomePay. The 1040-ES schedule isn't quite quarterly. For 2014, here's how it breaks down: 1040-ES #1 is for taxes accrued in Jan, Feb & March 1040-ES #2 is for taxes accrued in Apr & May 1040-ES #3 is for taxes accrued in June, July & Aug 1040-ES #4 is for taxes accrued in Sept, Oct, Nov & Dec You'll only send in 1 form and it includes both halves of Social Security & Medicare, the federal income taxes you withheld from your employee, and the federal unemployment insurance taxes (FUTA) you owe.
    March 31, 2014 at 12:32 PM
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    Alison S

    When filling out the 1040-ES form each quarter, do we submit one for us (the employer with the 7.65% of taxable wages for SSA and Medicare, an additional form for the employee (with her information?) for the other 7.65% for SSA and Medicare plus her Federal income tax withholding? What forms do we fill out to submit FUTA?
    March 29, 2014 at 12:47 AM

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