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Hopes-net is $10/hour- they said they will give me a W-2 in January
For your cost of living area, that seems about right. (Sadly, nanny's are usually paid less than housekeepers.)
Try to get it in writing that they will be paying your taxes. Did you fill out a W-4 with your dependents? If so, keep a copy of that. If not, ask them to provide you with a letter stating that they will be paying your taxes. It might be uncomfortalbe for you to ask now, but it will be more uncomfortable for you to get a 1099 in the mail and be stuck paying taxes when you were paid the lower rate. It might not seem like a big deal now. If they still like you at the beginning of the year, it's likely they will pay your taxes. But if your relationship deteriorates with them, they could *********. Get it in writing to protect yourself.
thanks Hopes- I have it in writing -they printed out my duties with hours/ pay and that they will pay my taxes etc-I initialed it and kept a copy- they are very efficient and very nice so far.
SuzyQ- if I end up paying my own taxes I end up paying 30% not just the 15%- my accountant told me this and I also found it online so i think it is best for me financially to have them pay me the $10/hour - they also plan to use me at other times so I will be getting more hours
I will talk to them about the insurance- don't plan on going anywhere anytime soon.
I am not sure we are all on the same page about "paying your taxes."
Some employers will pay the payroll taxes for your share of Social Security and Medicare taxes. It would be unusual for them to pay your income tax. And if you are expecting to pay federal income tax at a 30% rate, you have enough income from other sources that it makes me wonder why you need a job paying $10 an hour.
To get up to a 30% rate your income after exemptions and deductions would have to be in 6 figures. See here:
Could you give a breakdown with the exact figures? Salary, Social Security, and Medicare? Does your family have other income that pushes you into the highest tax brackets?
Workman's comp is entirely the employer's responsibility. It does not cost much and it protects both you and the employer in the event you are hurt while working. And unemployment insurance is also fully the employer's responsibility.
Edited to add: You should ask for confirmation that they have actually paid the income tax, Social Security, and Medicare tax. They will probably pay online and get a confirmation from the web site. Ask for a copy of that for your records. Tell them your accountant wants it. My brother-in-law had an employer who deducted the taxes from his paycheck but never paid them to the government. That caused a big mess.
Last edited by suzy_q2010; 09-05-2011 at 01:28 PM..
For your cost of living area, that seems about right. (Sadly, nanny's are usually paid less than housekeepers.)
Try to get it in writing that they will be paying your taxes. Did you fill out a W-4 with your dependents? If so, keep a copy of that. If not, ask them to provide you with a letter stating that they will be paying your taxes. It might be uncomfortalbe for you to ask now, but it will be more uncomfortable for you to get a 1099 in the mail and be stuck paying taxes when you were paid the lower rate. It might not seem like a big deal now. If they still like you at the beginning of the year, it's likely they will pay your taxes. But if your relationship deteriorates with them, they could *********. Get it in writing to protect yourself.
They cannot give her a 1099. It would be illegal. Household employees are a special class.
OP would have to contact the IRS and the employers would be in Big Trouble.
The only way the parents would not be responsible for the payroll taxes is by hiring through an agency. They would pay a higher rate, but the agency would be responsible for paying the taxes. I do not know if agencies can use 1099s, but I suspect not, since the agency determines when and where the nanny works. The nanny is still not an independent contractor.
I guess theoretically the nanny could incorporate and then be responsible for her own taxes by the parents paying the corporation, not her personally, but I can't see anyone wanting to do that.
People do all sorts of things that are illegal, Suzy. That's why it's always best to have everything in writing. I've know many people who have suddenly had to pay a ton of money in taxes because an employer suddenly decided to 1099 them when they were told taxes would be handled by the employer. It doesn't matter that you caan report them because, until it's sorted out, the employee has to come up with the money to pay the taxes. Win or lose, it's a big pain in the butt that could have been avoided by simply getting it in writing. I'm glad the OP did.
from what i understand via my accountant- if they do not report it and I do then i would be hit with self emplyment tax on both sides= 30% I've been emailing my accountant back and forth today and she said i am good-they are doing it right -
As for my income and me working for $10/hour -i do not have income in 6 firgures -not sure what you are talking about... it is self employment tax at 30% not income tax...
I was hoping to either find someone here that had experienced paying a nanny or being paid as a nanny
As for my income and me working for $10/hour -i do not have income in 6 firgures -not sure what you are talking about... it is self employment tax at 30% not income tax...
No. Self employed people pay the same amount of federal income tax, state income tax, and local income tax as everyone else. You would pay double the social security and medicare tax you would pay as an employee. Social security up to the first 104k earned. Basically, employers match 100% what you pay for social security and medicare taxes. When you're self employed, you have to pay the other half the employer pays. (You can opt out of paying but then you'd opt out of getting benefits later in life.) At under 20k per year earnings, there is no way your total taxes would equal 30%.
Your taxes for 11.50 per hour would be as follows:
Gross earnings 11.50 x 32 hours = $368
Federal, State, Local and SUTA Income Taxes are the same for employees and self employed (varies according to marital status and dependents but is the same regardless of being self employed or not.
Social Security is .042 for employees (employers pays other portion) and .133 for self employed because they pay the portion not paid by the employer. This tax only applies to the first $106,800 earned. Any earnings over $106,800 are not taxed for social security.
Medicare is .0145 for employees and .029 for self employed
thanks for the info- I am not sure what my net should be so I am not sure how to proceed - I am not sure it is worth bringing it up b/c they are quite flexible and laid back and it is a good situation for me. it sounds like it is less than $1 per hour which that does add up quickly- i guess that i will call my accountant tomorrow and see what she says-if she can run the numbers for me and then I can present it to them- I already signed that $10/hr was ok but I can say that i didn't really understand what they paid and what i paid on the taxes...
from what i understand via my accountant- if they do not report it and I do then i would be hit with self emplyment tax on both sides= 30% I've been emailing my accountant back and forth today and she said i am good-they are doing it right -
As for my income and me working for $10/hour -i do not have income in 6 firgures -not sure what you are talking about... it is self employment tax at 30% not income tax...
I was hoping to either find someone here that had experienced paying a nanny or being paid as a nanny
As I said, I have paid a nanny, though it was some time ago. The rules were the same then as now. I am also my husband's office manager and do payroll. He is self-employed.
As Hopes pointed out, the Social Security and Medicare taxes for self-employed folks is never 30%. I am a bit concerned that your accountant gave you that impression. That's why I wondered whether the 30% you mentioned was your income tax rate.
For a self-employed person it is Social Security 6.2 % + 4.2 % (employer's share and employee's share) = 10.4% (for 2011, the employee share is reduced. We do not yet know whether that will change or not for next year.)
Medicare is 1.45% + 1.45% (employer's share and employee's share) = 2.9%
Total is 10.4% + 2.9% = 13.3% for 2011 for a self-employed person.
If your employer pays his share only, your net check is 5.65% (4.2% + 1.45%) less than if he also pays your share.
If he pays your share, that is not taxable income, but you take home an additional 5.65%.
Of course, your income tax will depend on your total income from the year from all sources, including your spouse's income.
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My brother-in-law had an employer who deducted the taxes from his paycheck but never paid them to the government. That caused a big mess.
That's why it's always best to have everything in writing. I've know many people who have suddenly had to pay a ton of money in taxes because an employer suddenly decided to 1099 them when they were told taxes would be handled by the employer. It doesn't matter that you caan report them because, until it's sorted out, the employee has to come up with the money to pay the taxes. Win or lose, it's a big pain in the butt that could have been avoided by simply getting it in writing. I'm glad the OP did.
