The primary tax issues you should worry about are as follows:
- Federal income tax: To learn more about your federal income tax obligations please click here.
- State income tax: Unfortunately, it would be impossible to keep all viewers informed of their respective state income tax obligations. For viewers residing in states that impose an income tax, please visit your state’s department of revenue for further instructions.
- Social Security and Medicare taxes: To learn more about these tax issues please click here.
- Unemployment tax: As an employer, you may owe a federal unemployment tax and a state unemployment tax. For information regarding your state unemployment tax responsibilities please contact your state unemployment agency– a list of which can be found in the appendix of the IRS’s user guide. As far as your federal obligations are concerned, there are certain exemptions available– to find out more visit the IRS’s user guide.
As the employer of a nanny, you should be aware of certain liabilities to which you may become subject. Furthermore, you should also be aware of insurance that can protect you from such liability. The primary insurance issues you should be aware of are as follows:
- Health insurance: as the employer of your nanny, you may offer additional benefits such as health insurance. Generally speaking there are two approaches to health insurance: long term and short term. As a cursory overview, long term insurance is generally for periods of one year. Therefore, you might consider obtaining long term insurance for your nanny if you believe the employment will be for years. Short term insurance is generally for shorter periods. You might consider short term insurance if you’re planning to employ your nanny for a year or less. You should also be aware of certain tax benefits offered to employers who contribute to their employee’s health coverage.
- Car insurance: car accidents involving the nanny are one of the major areas for which the employer may find themselves held liable. Insurance plans differ from company to company and family to family, which is why it is so important that, if your nanny drives your family car, you make sure the nanny is covered if anything should happen. The employer may also find themselves liable if the nanny is operating his/her own vehicle while working. You should consider allowing the nanny to drive the family car and insure the car accordingly, or make certain that the nanny’s car is insured and the family’s liability is limited to the fullest extent allowable.
- Workers’ compensation insurance: Workers’ compensation insurance provides coverage for employees for injuries caused by or related to their employment. Laws regarding workers’ compensation differ from state to state. Some states require employers to have workers’ compensation insurance for their employees. In those states, if the employer fails to cover their employees, the employer may have to pay out of pocket for injuries incurred on or related to the job. The bottom line is that workers’ compensation is a good way to protect your employee and to limit your liability. At the very least, you should look into the particular requirements of your state.
- Liability insurance: As the nanny will work in and around your home, you, as the employer, open yourself to general homeowner liability. You should know what your homeowner or renters’ insurance coverage is– more specifically, you need to know whether it covers injuries sustained by household employees.