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.

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.