Nanny taxes are taxes paid to the government from a person working in and/or around your home. These jobs can include nanny, housekeeper, gardener, chef, personal assistant or caregiver.
The worker is considered a household employee if the employer controls what work is done and how it is done and can be full time or part time work.
If you pay someone that works in your home $2,100 or more a year or $1,000 in a quarter they are considered a household employee.
The employer must obtain the employee’s name and social security number.
The employer must withhold a certain amount of compensation from a household employee for FICA and Medicare.
As well as withholding a certain amount of money from your household employee, you must also pay your share of FICA employer taxes and federal and state unemployment taxes.
The employee, as well as the employer, can benefit from filing these taxes. The employee can prove she/he was working for a set amount of time and qualify for certain government benefits, such as social security and unemployment.
Forms Required to file:
Form SS-4 to obtain your federal Employer Identification Number, which is needed for the other forms.
Form I-9 is needed to be filled out by your employee to verify she/he is eligible to work in the United States.
W-4 Forms are used to determine what taxes are needed to be deducted from the household employee’s wages and sent to the IRS.
Schedule H Form is part of your personal return with Form 1040 & an accountant can help determine the amount the employer is taxed for FICA and unemployment.
You must register for unemployment insurance in your residing state.
You also need to have workers compensation insurance, which is very important.
If you reside in NY, you will also need to purchase a separate disability policy.
State taxes are generally paid quarterly while Federal taxes are paid annually.
If you refuse to file the proper tax documents you may be subjected to an audit from the IRS leading to tax evasion. Trying to classify your household employee as an “independent contractor” is a red flag to the IRS and should be avoided.
A 60-second read by the Baron Team: Congratulations 2018 College graduates! Throw that mortarboard as high in the air as you can and before it circles back down to earth, start thinking about saving for your retirement. You are most likely going to be responsible for setting yourself up for a successful retirement, so your best bet is to invest early and often.
Invest in yourself first. Most people think investing is the key to wealth, but while certainly important, you have to have some money first to invest. So as soon as you begin your first job out of school, start saving a minimum of 10% of your annual income for retirement. This will ensure that you invest in yourself first. You should plan on saving this much or more for the rest of your working career.
Here is a behavior trick to help you accumulate savings: have money taken out of your paycheck automatically and deposited into a 401(k), 403(b), thrift savings plan, or other retirement account. Read our previous post on “What is the Best IRA for a Young Investor?”. Almost all employers offer retirement investment vehicles like these, where you can contribute a certain percentage of your salary for the future. What you put into the account will grow tax deferred and be earmarked specifically for retirement. Because your contributions are automatically saved, it forces you to invest, which you might not otherwise do, and the money will be spent. Consider the IRS’s system of collecting taxes throughout the year through tax withholding. They know that if it was up to us to save and pay them one big check at the end of the year, we would have already spent the money. The same is true with investing. If a percent is taken out of every check directly, you won’t miss it. This is all part of behavioral finance, or the study of human behavior in financial decision-making. A fascinating field that we wealth advisors see play out on a daily basis.
Another behavioral finance mental trick is to keep three to six months of living expenses in a separate account from your checkbook, also known as an emergency fund. This will provide you with peace-of-mind to always know that no matter what bills come in or what happens in your career, you’ve got this safety-net of cash at your disposal that you can tap into. Keep the money liquid by putting it in a savings account or money market mutual fund. This will help protect you from those potential future financial downturns.
Baron hosted their fourth annual Casino Night event on May 3, 2018, at the newly-renovated Macaluso’s in Hawthorne, New Jersey. Attendees were given “play” money to participate in the casino games, ensuring no one could lose real money. Chips were cashed in for raffle tickets for the chance to win some great prizes, including gift baskets, and gift cards to various local businesses. The ultimate and most coveted prize of the evening was two tickets to see Beautiful: The Carole King Musical on Broadway.
Although guests had an opportunity to win raffled prizes, the big winner was the “Fair Lawn Food Pantry”, who received a monetary donation from Baron to honor our clients and friends.
Baron Financial Group recognizes that there are members of the community who are not as fortunate as others, who need help to meet the most basic of needs. Baron’s purpose is to help our clients reach their financial goals and to secure a better future for them and their families. With that purpose in mind, we are also committed to making the community a better place. It is our hope that together, we can look forward to a future of promise for all.
Editor’s Note: This post was originally published December 1, 2016. The information is still current as of this date.
A 30-second read by the Baron Team: For students with divorced parents who live separately, the FAFSA (Free Application for Federal Student Aid) asks that you fill out financial information in regards to the custodial parent. For FAFSA, the custodial parent is the parent who the child has lived with the most over the last twelve months.
Provided that the ex-spouse is the non-custodial parent:
Many private colleges assume that the non-custodial parent could be a possible source of funding, and therefore require that they fill out a supplemental financial aid document.
In that case, any financial support the non-custodial parent may give would only affect financial aid provided by the school, not the student’s federal and/or state aid benefits.
Baron Financial Group sponsored HONOR’S annual “Concert to End Homelessness.” The event was held Saturday, April 28, 2018 in Greenwood Lake, NY, with close to 500 people in attendance. Rob Cannillo, the brother of Baron Principal/Partner Victor Cannillo, helped coordinate the fundraiser and helps to raise awareness for HONOR.
HONOR has been helping Orange County, New York residents in need since 1974. On their website, it states: Since 1974 HONOR has provided all Orange County residents in need a safe environment that is committed to rebuilding the self-esteem and dignity of all those we are blessed to serve. With the goal of self-sufficiency in mind HONOR provides:
Residential stabilization & rehabilitation
HONOR’s vision is to “assist all clients to receive help appropriate to their needs so they may enjoy the growth and development which is their right as human beings.”
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Baron Financial Group is an Independent Financial Planning and Investment Management firm with a fiduciary responsibility to put your best interests first. As always, please feel free to reach out to us if you have any questions. To learn more about Baron Financial Group, view our 2-minute intro video.
Nick Scheibner, a Wealth Management Advisor and CERTIFIED FINANCIAL PLANNER™ Professional with Baron Financial Group, fortifies his commitment to the fiduciary standard by becoming a NAPFA-Registered Financial Advisor. Nick joins Founder and Wealth Management Principal, Victor Cannillo at Baron Financial Group, as NAPFA-Registered Financial Advisors. Victor has held this certification since 1998.
According to the National Association of Personal Financial Advisors (NAPFA):
NAPFA membership is granted only to advisors who pass an extensive screening process and those advisors must be paid directly by their clients, without receiving conflict-inducing commissions and rewards generated from the sale of financial products.
NAPFA members live by three important values:
To be the beacon for independent, objective financial advice for individuals and families.
To be the champion of financial services delivered in the public interest.
To be the standard bearer for the emerging profession of financial planning.
NAPFA’s continuing education (CE) policy is an important part of its commitment to the highest competency standards in the industry. NAPFA-Registered Financial Advisors complete 60 hours of CE spread across a broad range of subjects every two-year CE cycle. NAPFA standards have continuously been the most rigorous in the industry for over 30 years. All NAPFA-Registered Financial Advisors are required to always work in a Fee-Only capacity. The Fee-Only structure is the best way to align compensation with a client’s needs, forgoing any and all commissions and referral fees.
In support of the SCARC Foundation, members of Baron Financial Group attended the 2018 SCARC Foundation Honors and Leadership Awards Celebration on March 22, 2018.
SCARC Inc., an organization serving people with developmental disabilities, is dedicated to the empowerment and support of persons with developmental disabilities and their families. The organization will facilitate partnerships with community resources, assist in maximum community participation, promote individual planning based on choices, preferences and needs, and foster the development of socially valued roles for each person served. For more information, visit the SCARC website at scarc.org.
At Baron, we recognize that the financial planning challenges faced by families with special needs members are significant. We take great pride in helping families address today’s needs and plan for those that are likely to follow. For more information about our services for families with special needs, visit our special needs page.