If my nanny earns $509.38 in a week I have to pay her the $509.38 plus $89.40 in various taxes to the federal government and NJ state government. So I essentially pay 18% more than I would if it was "off the books".

Not sure if I get to deduct any of those taxes paid on my federal or state return since I haven't gotten to that point yet where I need to file my personal tax return . However at the federal level you are offered a child care tax credit. Not sure how much of that credit will be reduced because of my income.

You don't have to get worker's comp insurance for your nanny because one of the taxes that are part of the $89.40 I calculated above is New Jersey's required 0.5% tax for the NJ State Disability Insurance. That being said you might want to ask your home owner's insurance company regarding how a nanny in your house is covered under your existing home owner's insurance for other potential liabilities.

How much over the nanny take home more are you paying? I assume you get to deduct the taxes you pay on your federal return in April? Is there any tax benefit for the wages? Did you have to get worker comp insurance or any other type of insurance for your Nanny? Thanks for the input.

I had to go through this process back in February, 2013.

First step is to create an Federal Employer Identification Number (EIN) for yourself. You can do this easily on-line here:
https://sa1.www4.irs.gov/modiein/individual/legal-structure.jsp
You should choose "sole proprietor" as your legal entity.


Then you use that EIN to file the form NJ-REG with the State of New Jersey. This form simply registers your "business" with the State of NJ. The for will ask for your EIN that you have obtained.
When filling out this form for Line I the NJ Business Code should be 2779 and make sure you check the box for Domestic (Household Employer)
For Line N the Standard Industrial Code is 8811. For Line O the NAICS code is 814110. Fill out the rest of the report then send it in. For most NJ businesses you have to file a quarterly report to NJ stating how much you have paid your employee. However for people like us who are just employing an in-home nanny you only have to report your information annually to NJ. If you fill out the form NJ-REG correctly then you will fall into the category of only having to report the info annually which is what you want.

Once you do that stuff then report back here for further instructions if you like.

Quote:

complicated question. review this and see what applies to your situation

http://www.irs.gov/publications/p926/ar02.html

Hi.

How does one who has a nanny (caregiver) report nanny's wages so that they may pay taxes & participate in social security fund?

Any guidance is appreciated.

Thanks