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House Cleaning Blog

How to Avoid the Nanny Tax | Maid Service FAQs

  Joseph Berger  |    12 February 2016  |    Choosing a maid service

taxes-1040-nanny-taxTax Season Advice

How to Avoid the Nanny Tax

As we enter into the tax season, it's important to be informed on as much as possible. Missteps, even small ones, can be costly. The tax can apply to any worker you hire for a service over a certain amount. Make sure you're informed of how and what the Nanny Tax is.

What Are Nanny Taxes?

The "nanny tax" is comprised of a combination of federal and state taxes that typically include:

• Social Security & Medicare taxes (FICA), as well as federal & state income taxes withheld from the employee

• Social Security & Medicare taxes, as well as federal & state unemployment insurance taxes paid by the employer

These taxes come into play when a family pays a nanny - or any household employee - $2,000 or more in a calendar year (or $1,000 ore more in a calendar quarter for unemployment insurance taxes).

Note: Not all states operate this way. Some don't have income taxes, while others require additional taxes to be either withheld from your employee, paid by the employer, or both. To see the specific requirements for your state, visit the nanny tax page from your state.

Tips to avoid the Nanny Tax:

  1. Pay your weekly maid no more than $28.83 per house cleaning.

  2. Pay your every other week maids no more than $57.65 per home cleaning.

  3. Find a time machine to transport you back to the Happy Days of the 1950's. That is probably the last time you could find a maid that will work at third world rates. Even if you could do that, I doubt Mrs. C would have ever been allowed to have a maid. After all the Cunningham's needed Arthur Herbert Fonzarelli's (aka Fonzie's) rent money to make ends meet.

  4. If you live in present-day America, hire You've Got MAIDS and expect to pay more than #1 & #2.

Unless you hire a legitimate home cleaning maid service you are obligated to pay SOCIAL SECURITY, MEDICARE, FEDERAL UNEMPLOYMENT TAXES, AND STATE UNEMPLOYMENT & DISABILITY TAXES. You've Got MAIDS is a professional residential maid service franchise who insulates you from the Nanny Tax. They also do a good job cleaning your toilets.

This useful information on the Nanny Tax, what it is and how it can affect you comes from Care.com:

Unless you're a tax expert, you probably have a few questions about how to do things correctly. To help you out, here are the answers to some common nanny tax questions and concerns: 

Is Your Nanny an Employee?

In short, yes. According to the IRS, a person is an employee if you're telling them what they will do and how they will do it, as opposed to an independent contractor that you tell only what results you're looking for. Families that misclassify their household employee as an independent contractor (by providing a Form 1099 for filing taxes) can be charged with tax evasion.

What Will Families Need to Pay Nanny Taxes?

Here are four things to collect:

ID numbers: You need both the federal and state tax identification number in order to report your nanny taxes. You can get your federal employer identification number (FEIN) from the IRS and use this number to obtain your state identification number from the appropriate tax agency in your state.

Payroll info: You need to accurately calculate your employee's gross pay, calculate the taxes withheld, and track the corresponding employer taxes each pay period.


◦ You must provide your nanny with a Form W-2 by the end of January each year.

◦ You need to file any required year-end forms with the state, as well as Form W-3 and Form W-2 Copy A with the Social Security Administration.

◦ You need to prepare a Schedule H and file it with your federal income tax return.

Quarterly filings

◦ You should file state tax returns, typically on a quarterly basis.

◦ You should send 1040 estimated payments to the IRS four times per year.

Hiring You've Got Maids® for your house cleaning services eliminates the need for you to worry about paying a the tax. Click below for more info and on how to get a free estimate for your cleaning services.


Read More on Tax Issues:

Year end tax tips | How to avoid nanny tax

About You've Got Maids®

You've Got Maids® was carefully created to mature into a coast to coast house cleaning franchise. The founders got in to do the dirty work, so they can teach their Franchise Partners how to run successful businesses. If you think you would like to join a franchise, that is more like a family, then You've Got Maids® might be right for you. Learn more about this brand on the company's "franchise opportunity" pages.