A. As an employer of a household employee you should be aware of certain IRS forms for which you are responsible. One of the best resources that we have found is the IRS user guide, which, if you have additional inquiries, you should read carefully. For a brief look, you should be aware of the following documents:
Employer Identification Number (EIN): You can visit the IRS’s online application for an Employer Identification Number by clicking here. As an employer of a household employee (your nanny) you will need to include your EIN on the tax forms you file for your employee.
W-2: Every employer engaged in a trade or business who pays remuneration for services performed by an employee, including non-cash payments, must file a W-2 for each employee. So, as an employer, you must file a W-2 for your nanny. For general information and instructions on 2011 W-2 & W-3, please click here. To view a PDF W-2 for informational purposes provided by the IRS, please click here.
W-3: Anyone required to file a W-2 is also required to file a W-3 to transmit copy A of the W-2. As an employer of a household employee, you must file a W-3. For further information, the IRS provides a sample W-3 and an accompanying explanation: to view it in PDF form, please click here.
W-4: If you and your nanny agree that you, as the employer, will withhold federal income taxes from the nanny’s paycheck, then the your nanny must complete an “Employee’s Withholding Allowance Certificate” (W-4) so that the employer knows how much to withhold. For a PDF version of a 2011 W-4, please click here.
W-5 (Earned Income Credit): The W-5 form should be used if your nanny qualifies for, and elects to use, the Earned Income Credit (EIC). Certain workers can claim an EIC on their federal income tax return. There are a number of requirements for both the employer and the nanny that accompany a claim for an EIC. To find out more visit the IRS’s user guide. You can also view a PDF 2010 version of a W-5 by clicking here.
Schedule H: When you file your federal income taxes, attach the Schedule H Form 1020 (House Employment Taxes) to your 1040. You should use the Schedule H Form to figure your total household employment taxes– i.e., Social Security, Medicare, Federal Unemployment, and withheld Federal Income Taxes. Add these household employment taxes to your income tax. For further information you should consult the IRS’s user guide. You can view a Schedule H by clicking here.
If you have trouble with your tax responsibilities please consult with a licensed accountant or tax lawyer.