We don’t need to say it again but here it is: this year is different in so many ways. Preparing your year-end nanny taxes is no exception. There’s already a lot to think about, but here are four new ways your taxes could be different this year.
1. You used a learning pod and/or nanny share.
Even if you started a learning pod or nanny share late in the year, your employee’s wages likely exceeded the nanny tax threshold ($2,200) and you will have year-end tax obligations. In the case of a pod or share, each family needs to issue a W-2 to the nanny, and each family files a Schedule H with their personal tax return and Form W-3 with the Social Security Administration.
You can use a nanny tax calculator to estimate your total nanny tax responsibility.
2. You had multiple nannies throughout the year.
You may have let go of your nanny in March due to the pandemic, you may have hired someone else during the summer to fill in the gaps, and you may have hired another person to help with remote schooling and tutoring this fall.
Even if care providers are employed for a short time, their wages still could still exceed the nanny tax threshold. For those that do, you need to send each of them a W-2 and confirm that you have their correct mailing address. All of these wages will need to be reported on your Schedule H.
3. Your nanny took FFCRA paid leave.
If your nanny took advantage of paid leave benefits offered through the Families First Coronavirus Response Act (FFCRA), you will need to report that on their W-2. Currently, caregivers can take FFCRA paid leave through the end of the year.
4. You contributed to your nanny’s student loans.
As part of the CARES Act, you can contribute up to $5,250, tax-free, toward your nanny’s student loans. While you already could’ve contributed that amount to their educational expenses (fees, textbooks, etc.), the CARES Act added student loans to the mix. You can still make a contribution to this, but you must do so by the end of the calendar year.
Don’t be afraid to ask for help.
Taxes are already confusing—especially when it comes to household employees. With all the twists and turns of 2020, getting help from our friends at GTM Payroll Services is the smart move. You can risk fines and penalties for not getting it right. To make things easier, Sittercity families get a free setup! All backed by a team of household employment experts available by phone, email, and chat. Sign up online or call (800) 929-9213 for a free, no-obligation consultation.