First time parents have a lot of questions, including whether they should file nanny 1099 or w2 forms. The confusion is understandable. However, knowing which form to use is important. The Internal Revenue Service classifies nannies as household employees. Therefore, families must report them by using a Form W2.
We will explain why you must use a Form W2 when you report a nanny. We will also break down how you can create W2 forms for nannies or other household employees.
Are Nannies Household Employees?
The IRS categorizes nannies under the “household employee” umbrella. Household employees are also housekeepers, maids and gardeners. The IRS considers anyone an employee if they work in or around your private residence.
However, there is an important distinction. Repairmen and other temporary contractors are not your employees. There is one key way to understand whether to file a nanny 1099 or w2. A nanny is a household employee because you not only control the work that they do, but also how they do their work.
Does the “Nanny Tax” Apply to Me?
IRS Publication 926 outlines tax requirements when you create a Form W2 for your child’s nanny. The nanny tax combines both federal and state tax requirements. The IRS requires families to keep track of these tax requirements. Despite its name, you must meet the full outlined requirements when you hire any household employee.
You need to know about nanny taxes for when your household pays a certain amount of money to an employee. An employer learning whether to file a nanny 1099 or w2 must pay a nanny tax if they pay a household employee $2,300 or more in a calendar year.
The nanny tax also relates to any unemployment insurance tax payments. Your family will need to pay a nanny tax if you pay $1,000 or more within a calendar quarter. Research your specific state obligations. You do not need to pay income taxes in certain states. However, other states require families to withhold taxes from household employees.
How to Create a W2 Form?
You must file your 2021 tax year W2 forms before Jan. 31, 2022. The Social Security Administration provides online resources for household employers. We recommend investing in a nanny payroll software to make the process easier.
Employers should ask their employees to complete Form I-9. Employers should then collect the form. You will use the form to reference the employee’s Social Security number and their home address.
Our W2 and 1099 Software at Advanced Micro Solutions can help you with the next step. You can generate W2 forms with our menu-driven format. As you navigate filing nanny 1099 or w2, our software only requires that you input information once.
Our software supports as many as 1,999 payers and/or employers. Users can also print forms on pre-printed forms. Users do not need to worry about meeting deadlines. Our E-Filer software at Advanced Micro Solutions electronically files your year-end forms. The E-Filer sends any of your W2 forms directly to the Social Security Administration.