Have a Nanny? Schedule H Guidance – A How To

It’s tax time again!  If you had a nanny, babysitter, or any household employee last year, you need to file form Schedule H with your tax return if you answer yes to any of the following:

  • Did you pay any one household employee cash wages of $2,100 in 2019 or $2,200 in 2020?
  • Did you withhold federal income tax during 2019 for any household employee?
  • Did you pay total cash wages of $1,000 or more in any calendar quarter of 2019 to all household employees?

If you answered yes to any of the above, then you should download the Schedule H itself and also the Instructions for Schedule H from the IRS website.

Schedule H – Part I

Below is an example of what Part 1 of Schedule H looks like when filled out, with some hints added in-line.  This example is for a nanny who worked during school vacations and made $7,150 gross cash wages.

While the forms below walk through an example from a prior year, Form Schedule H with your 2019 tax return will look similar, except that the limit for item 1 (Total cash wages subject to social security tax) has increased to $128,700.

Schedule H Part 1 - Summer Nanny Example

If using the Android version of the Nanny Pay Advisor app, you will find your nanny’s gross earnings for Last Year (2019) by going to the Reports section and selecting “Employee Pay Summary” for Range “Last Year”.

MainMenuReportsHighlight  ReportsLastYearHeader

For the iOS version of the Nanny Pay Advisor app, you will find this info on the top of the Pay History tab when the “Last Year” time range is selected.

Now onto Part II to calculate Federal Unemployment (FUTA) tax owed.  The calculations will vary depending on your state.

Schedule H – Part II for most states (except US Virgin Islands)

For the 2019 tax year, only the US Virgin Islands is considered a “Credit Reduction State” for Federal Unemployment (FUTA) Tax purposes. If you have employed a nanny there, skip to the next section.

For all other states, the calculation of FUTA owed is straight-forward.  You will be paying .6% (.006) of your nanny’s first $7,000 wages in FUTA.  So this means the maximum amount of FUTA you will need to pay is $42 for the year.

Below is an example from Massachusetts, a non-credit reduction state.  Notice if you can answer No to questions 10, 11, and 12, then you should leave all of Section B blank.

Schedule H - Part 2. Example for MA

Then after you fill in the calculations in Part III, then this Schedule H and payment owed goes along with your 1040/1041 tax filing.   And that’s all there is to it!

Schedule H – Part II for Credit Reduction States (US Virgin Islands)

If you have employed a nanny in the Virgin Islands, then for Part II you will need to instead fill out Section B and leave Section A blank.

In prior years, this has also applied to California and other states, but starting for the 2019 tax year, the only credit reduction state left is the US Virgin Islands.

Schedule H – Part III

Then after you fill in the calculations in Part III, this Schedule H and payment owed goes along with your 1040/1041 tax filing as part of the yearly household employer duties.

How do I create a W2 for my nanny?

You can easily generate Form W-2 for your nanny using the online tools provided by the Social Security Administration. Filing only takes a few minutes, but must be completed by January 31, 2020 for the 2019 tax year.

Provide the document generated by the online tool to your nanny, babysitter, or other household employee. Your household employee will use this for their own tax returns.

Steps to Generate a W-2 for your nanny

  1. Go to the online tool found at http://www.socialsecurity.gov/employer/.
  2. Click on the button to Log in to Business Services Online (or Register if you have not done so previously).
  3. Follow the instructions to report Wages to Social Security, and Create Forms W-2/W-3.
  4. Enter the information requested by the Social Security website
  5. Download the completed Form W-2, and provide this to your nanny for her own tax return.

W-2 FAQs

For the Social Security and Medicare tax withheld, do I enter just the portion withheld from the employee’s paycheck or also the amount owed by me?

For Social Security and Medicare tax withheld, enter only the portion withheld from your nanny’s paycheck. The employer portion will come into play when you file form Schedule H with your own tax return.

What should I enter in the Social Security and Medicare wages box?

Social Security wages and Medicare wages will each be the same as the Taxable Wages amount, as long as your nanny makes less than $125,000 from you.

For California, where do I input information about employee paid SDI?

The amount your employee has contributed to CA State Disability Insurance Tax should be input to go in box 14: “Other”. Indicate with label of “CA SDI” and the amount withheld from your employees paychecks during 2019.

What else do I need to do for tax time?

With your own tax return, you will need to include form Schedule H and remit taxes withheld and owed at that time.

For a full checklist of how to pay your nanny legally, see here.  This information and more is also included in the Nanny Pay Advisor Android app and iPhone and iPad app.

Does my nanny need to use the new federal W-4 for 2020?

Does my nanny need to use the new federal W-4 for 2020?

Household employees with a 2019 Federal W-4 on file can continue to use elections from that version for 2020. Alternatively, they can choose to switch to use the new form at any point during 2020.

New employees should use this new W-4 form for 2020, which was one of the tax changes for 2020. Additionally, if your household employee wishes to revise their elections, they should switch to the new 2020 form.

Do I need to withhold income tax when paying my nanny?

Per the IRS, withholding income taxes is not mandatory for household employers. However, your nanny still may owe income taxes on this income. You should agree ahead of time with your nanny whether you will or will not withhold income taxes on her behalf so she can plan accordingly.

If you do not withhold income taxes on you nanny’s behalf, then these changes to the W-4 will have no effect on your nanny’s paycheck.

Can I configure the new W-4 in the Nanny Pay Advisor app?

The Nanny Pay Advisor iOS app and Android app support both the 2020 W-4 Form and the 2019 W-4 Form. Use the Withholding page to input in the responses for each question from your nanny.

The updated brackets for 2020 will start with pay statements covering time January 1, 2020 and beyond.  Prior to that, the 2019 tax brackets will continue to be used.

Nanny Tax changes for 2020

Nanny Tax changes for 2020

In 2020, paying employment taxes becomes required by law once a babysitter, nanny, or other household employee earns $2,200 in a calendar year.  This is up from $2,100 in 2019.

On the other end, the cap for Social Security tax is now at $137,700 for 2020.  In 2019, this was $132,900.  Wages above these amounts are not subject to Social Security tax, but are subject to Medicaid tax.

Income tax changes

Income tax withholding on a nanny’s behalf is still not required for household employers. But you and your nanny can agree to this. In this case, one of the more prominent changes is the redesigned federal Form W-4. The aim of this change is to provide more transparency for the monetary values associated with allowances. Any new household employees should use the new form. Employees from 2019 can update to the new form, or continue to use the old form if they have no changes.

Federal income tax brackets have also changed. The 7 possible rates remain the same, but the amount of income to reach each higher rate has increased, resulting in less income taxes to be withheld for those on the cusp of a bracket.

Filing for 2019

These changes go into effect started in wages paid in 2020.  For 2019’s tax return, the 2019 brackets will continue to be used.  And if you have a nanny or other household employee, you would still create and file a W-2 for each employee by January 31, 2019.

What hasn’t changed:

  • The rates of Medicare and Social Security taxes remain unchanged from last year.
  • It is still tax evasion to avoid responsibilities if you do meet the requirements to be considered a household employer.

Download our handy app from the Google Play store for Android devices or the App Store for iOS devices to automatically calculate taxes and withholdings, track time, create & email pay statements and guide you through your tax responsibilities.

Android App Update to Google Drive

If you are using the Android version of the Nanny Pay Advisor app, you may notice some changes to the Google Drive integration in our latest release, v3.6.6.

What’s different?

When saving your nanny’s Pay Statement to Google Drive, they will now be saved to a folder withing Google Drive of ‘Nanny Pay Statements’.

Additionally, the first time you do so, you will get a prompt requesting permission for the app to access Google Drive.

Why the change?

Google has deprecated its prior toolkit for Drive integration. Effective as of December 2019, the old integration methods will be shut down by Google. Our latest app update uses a newer API to achieve similar Google Drive integration as before, however, you may notice the slight differences in functionality.

What if the Google Drive integration isn’t working?

The first thing to check is that you have version 3.6.6 of the app. If not, download it from Google Play. If you are still having issues, let us know!

Have feedback?

If you run into any issues with the changes or have any feedback, please let us know at info@nannypayadvisor.com. We are always happy to hear from you and make things right!

Federal W-4 and State Withholding Form

 

State Form
Federal

2019) Form W-4 https://www.irs.gov/pub/irs-prior/fw4–2019.pdf  If your employee has this on file, you can continue to use the 2019 version for 2020.

(2020) Form W-4 https://www.irs.gov/pub/irs-pdf/fw4.pdf  Use for new employees.

Alabama  AL A-4 https://revenue.alabama.gov/wp-content/uploads/2017/05/A4_201403.pdf
Alaska  None
Arkansas  AR AR4EC http://www.dfa.arkansas.gov/offices/incomeTax/withholding/Documents/AR4EC.pdf
Arizona  AZ A-4 https://azdor.gov/sites/default/files/FORMS_WITHHOLDING_2019_A-4_f.pdf
California  CA DE 4 https://www.edd.ca.gov/pdf_pub_ctr/de4.pdf
Colorado  CO uses Federal W-4
Connecticut  CT CT-W4 https://portal.ct.gov/-/media/DRS/Forms/2019/Withholding/2019-CT-W4.pdf
Delaware  DE uses Federal W-4
District of Columbia  DC D-4 https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2018%20D-4.pdf
Florida  None
Georgia  GA G-4
Hawaii  HI H4 http://files.hawaii.gov/tax/forms/2017/hw4.pdf
Idaho  ID uses Federal W-4
Illinois  IL IL-W-4 https://www2.illinois.gov/rev/forms/withholding/Documents/currentyear/il-w-4.pdf
Indiana  IN WH-4 https://forms.in.gov/Download.aspx?id=2702
Iowa  IA W4 https://tax.iowa.gov/sites/default/files/idr/forms1/2019IAW-4(44019)_2.pdf
Kansas  KS K-4 https://www.ksrevenue.org/pdf/k-4.pdf
Kentucky  KY K-4 http://revenue.ky.gov/NR/rdonlyres/690434A9-D933-4F06-8228-6C70D441A8E0/0/42A8041113.pdf
Louisiana  LA R-1300 (L-4) http://revenue.louisiana.gov/TaxForms/1300(4_11)F.pdf
Maine  ME W-4ME http://www.maine.gov/revenue/forms/with/2015/Form%20W-4ME.pdf
Maryland  MD MW507 http://forms.marylandtaxes.gov/18_forms/MW507.pdf
Massachusetts  MA M-4  https://www.mass.gov/files/documents/2017/12/12/dor-withholding-form-m-4.pdf
Michigan  MI MI-W4 https://www.michigan.gov/taxes/0,4676,7-238-44143-287984–,00.html
Minnesota  MN W0-MN http://www.revenue.state.mn.us/Forms_and_Instructions/w-4mn.pdf
Mississippi  MS W4 https://www.dor.ms.gov/Forms/89350158.pdf
Missouri  MO W4 https://dor.mo.gov/forms/MO-W-4.pdf
Montana  MT uses Federal W-4
Nebraska  NE uses Federal W-4
Nevada  None
New Hampshire  None
New Jersey  NJ NJ-W4 http://www.state.nj.us/treasury/taxation/pdf/current/njw4.pdf
New Mexico  NM uses Federal W-4
New York  NY IT-2104 http://www.tax.ny.gov/pdf/current_forms/it/it2104_fill_in.pdf
North Carolina  NC NC-4 http://www.dor.state.nc.us/downloads/nc4.pdf
North Dakota  ND uses Federal W-4
Ohio  OH IY 4 http://www.tax.ohio.gov/portals/0/forms/employer_withholding/Generic/WTH_IT4_FI.pdf
Oklahoma  OK W4 https://www.ok.gov/tax/documents/OK-W-4.pdf
Oregon  OR uses Federal W-4
Pennsylvania  PA uses Federal W-4
Rhode Island  RI RI W-4 http://www.tax.ri.gov/forms/2018/Withholding/RI%20W-4%202018.pdf
South Carolina  SC uses Federal W-4
South Dakota  None
Tennessee  None
Texas  None
Utah  UT uses Federal W-4
Vermont  VT W-4VT http://tax.vermont.gov/sites/tax/files/documents/w4vt.pdf
Virginia  VA WA-4 https://tax.virginia.gov/sites/default/files/taxforms/withholding/any/va-4-any.pdf
Washington  None
West Virginia  WV WV/IT-104 https://tax.wv.gov/Documents/TaxForms/it104.pdf
Wisconsin  WIWT-4 https://www.revenue.wi.gov/DORForms/w-204f.pdf
Wyoming  None

Among other nanny tax changes coming in 2020, an updated Federal Form W-4 will be available.

Nanny Tax Changes for 2019

In 2019, paying employment taxes becomes required by law once a babysitter, nanny, or other household employee earns $2,100 in a calendar year. Along with other nanny tax changes for 2020, this amount increases to $2,200.

On the other end, the cap for Social Security tax is now at $132,900 for 2019.  In 2018, this was $128,700.  Wages above these amounts are not subject to Social Security tax, but are subject to Medicaid tax.

Also, federal income tax brackets and deductions amounts have changed. The 7 possible rates remain the same, but the amount of income to reach each higher rate has increased, resulting in less income taxes to be withheld for those on the cusp of a bracket.

These changes go into effect started in wages paid in 2019.  For 2018’s tax return, the 2018 brackets will continue to be used.  And if you have a nanny or other household employee, you would still create and file a W-2 for each employee by January 31, 2019.

There have also been some notable changes for individual states

  • Washington state has enacted Paid Family and Medical Leave, requiring up to .4% contribution to fund (less for employers with < 50 employees)
  • Missouri has eliminated one of its income tax brackets
  • North Carolina and Georgia have lowered individual income tax rates

What hasn’t changed:

  • The rates of Medicare and Social Security taxes remain unchanged from 2018.
  • It is still tax evasion to avoid responsibilities if you do meet the requirements to be considered a household employer.

Download our handy app from the Google Play store for Android devices or the App Store for iOS devices to automatically calculate taxes and withholdings, track time, create & email pay statements and guide you through your tax responsibilities.

5 Reasons to pay your nanny over the table

5 Reasons to pay your nanny over the table by Nanny Pay Advisor

What’s involved in not paying under the table?

If you are not sure where to start, or you have been shocked at the full service payroll prices, let the Nanny Pay Advisor App help.  Find it for iOS on the App Store or get it for Android on Google Play.

 

Nanny vacation and holiday benefits

When hiring a nanny and discussing salary, one often overlooked discussion is that of vacation and holiday expectations.

Vacation and holiday benefit considerations

  • Will you offer a certain amount of paid time off or limit unpaid time off?
  • Is the nanny able to choose all the dates or are there any fixed days, such as during your own vacation plans or holidays? The most commonly paid holidays are New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
  • Will this time be lumped together to use for either sick, holiday or vacation? Or will they each be considered separately?
  • What sort of advanced notice do you require for time off?
  • Can the time be used immediately or only after some number of days worked (30 days, 60 days, etc)?
  • What happens to unused days? Are they rolled over into next year, forfeited, or paid out?

What is required

Federal law does not require household employers to offer paid vacation time or paid holidays for a nanny. Part-time or summer only nannies would likely not expect these perks. On the other hand, full-time year round nannies, especially experienced ones, are likely to look for or expect this benefit.

Even if a nanny does not specifically inquire about any holiday or vacation benefits, offering them can promote a positive nanny-employer relationship. This can help keep a great nanny happy and show her how much you appreciate her own well-being.

Expectation setting

No matter what you decide, you should discuss expectations up front when you discuss salary with your nanny and review yearly. In the nanny-employer relationship, upfront and frequent communication is critical in avoiding resentment and issues later on.

How to track

When using the Nanny Pay Advisor app for Android devices or the app for iOS devices, vacation or holiday time to be paid should be specified via the Time Card for the corresponding pay period.

Nanny Payroll Service Options Comparison

When you hire a nanny, you may be surprised at the complexity involved to simply pay her.  There are several different options to handle payroll.

Payroll Option  Time Investment   Cost of service per year Drawback
 Paying under the table Very Low $0 Illegal, Nanny gets no benefits
 Full Service Payroll provider Low $1,000+ High cost
 Do it all yourself High $0 Lots of time required
 Nanny Pay Advisor Medium-Low $60 Some time required

Let’s look at each of the nanny payroll alternatives in a little more detail.

  1. Pay under the table.  This is bad for the nanny and bad for you as the employer.  If you are paying $2,200 or more to your nanny in 2020, it considered tax evasion to go this route.  For the nanny, she loses out on accruing Social Security benefits, unemployment benefits, a verifiable record of employment to help build her credit history, and worker’s compensation benefits should she get injured on the job.  Luckily, there are tax breaks available to you as a household employer which can cover much of the extra cost required to pay legally.
  2. Use a full service payroll provider.  Using a company such as Care.com HomePay by Breedlove will take care the initial registration as a household employer, handle all payroll for you, and file quarterly and yearly reports on your behalf.  However, there is a steep price for this, and you may pay over $1,000 for a year of such a service.
  3. Do all the legwork yourself.   You can find out the federal, state and local requirements of what and when to register and pay for.  Then on a weekly basis calculate the required withholdings, give your nanny a pay stub, retain required records, and write a check to your nanny.  This is the cheapest of the legal options, but also the most time-consuming and tedious.  Use this handy checklist to see what is involved.
  4. Nanny Pay Advisor.  Nanny Pay Advisor is a mobile app for Android phones and tablets or your iPhone and iPad that takes care of the most tedious and regularly recurring parts of nanny payroll, and guides you through the rest.  With a $5 a month price tag and even a free trial, you can’t go wrong to give it a try.  Download it from the Google Play Store or the Apple App Store.