One of the consequences of the current COVID-19 crisis is that parents have brought in helpers to assist with schoolwork, babysitting, housework, etc. Unfortunately, this can lead to a shock come tax time. Most people know it as the Nanny Tax!
When you hire household help you could be responsible for paying social security, medicare, and unemployment taxes. The taxes apply if you have paid at least $2,100/annually or $1,000 in any quarter of the year for any one individual.
Remember, social security and medicare have both an employee and employer portion. If you aren't deducting the employee's share you could be on the hook for it. Also, if the employee requests, you can withhold their income tax withholding and remit the to the government as well.
If you have hired someone to provide, babysitting, housework, or caring for an elderly family member reach out and let's discuss how I can help you set-up a simple payroll process and make sure you are on the right track come tax time!
You can reach me about this or any other accounting or tax matter at 856-494-6148 or Tim@monarchcontroller.com
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