![]() Still, it is only applied to the first $7,000 of each employee’s wages in the current or previous year.Įven if the employer records $1,500 or more in a single quarter and the other quarters fall below the threshold, the employer will still be required to pay the FUTA tax. How FUTA WorksĮmployers are required to pay the Federal Unemployment Tax if they spend at least $1,500 in wages during a single calendar quarter. In some cases, the IRS may allow some employers to pay the tax in installments during the year. The act requires employers to file Form 940 annually with the Internal Revenue Service (IRS). The tax is imposed solely on employers who pay wages to employees.įUTA Tax is used to pay employees who leave employment involuntarily and are eligible to claim unemployment insurance. FUTA Tax is a United States federal tax imposed on employers to help fund unemployment payments. Parents should also ensure that their nanny contract addresses the requirements.FUTA is an abbreviation for Federal Unemployment Tax Act. State law differ on these matters and may or man not apply to nannies.įor additional assistance, parents should contact their state department of labor and/or work with a nanny payroll company or employment attorney. Parents are responsible for paying 100% of their nanny’s federal unemployment tax (known as FUTA) and any required state unemployment taxes and insurance. Parents may also be responsible for paying workers’ compensation insurance, which provides coverage for employees for injuries caused by or related to their employment. ![]() Parents will still pay the IRS the required $1.33. Using the example above, the nanny will be paid $9.44 for an hour of work ($10 – $.565). Option 2: Parents withhold the nanny’s share of FICA taxes from the nanny’s wages and use the money withheld to make the required tax payments.Thus, the total FICA taxes on one hour of the nanny’s work is $1.33, which the parents will pay in its entirety from their own funds. For example, if a nanny’s wages are $10 per hour, the nanny’s share of FICA taxes is $0.565 (5.65% X $10) on one hour of work, and the parents’ share as the employer is $0.765 (7.65% X $10). Thus, parents will not withhold FICA taxes from the nanny’s wages and will pay the nanny’s share from parents’ own funds. Option 1: Parents pay both their own share as well as the nanny’s share of FICA taxes.Parents are responsible for paying the IRS both their own share as well as the nanny’s share. For 2011, a nanny’s share of FICA taxes is 5.65% of his or her wages, and parents have a matching employer share of 7.65%. Usually, parents and a nanny each owe FICA taxes. Social Security and Medicare taxes are known together as FICA taxes. IRS Form W-4 can be downloaded at irs.gov, and the state form should be available at the website of the state taxing or revenue agency. If parents do withhold taxes, the nanny should complete IRS Form W-4 and the equivalent state form (for states that have income taxes) for the calculation of the proper amount of money to be withheld. ![]() Nevertheless, some parents do so as a courtesy. Under federal and state law, parents are not required to withhold money from their nanny’s wages for payment of federal and state income taxes.
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