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SUBJECT: Nanny Taxes etc., I own a National Placement agency,  (Uniglobe Nannies)  and one of the most asked questions are in regards to taxes.  I have posted these questions and answers for families who hire nanny's or domestic help. 1.  What taxes do I need to pay? In general IRS requires you to file, if you pay a domestic employee more than $1000 per year.  This includes - Social Security, Medicare, FUTA, State Unemployments and disability. 2.  What taxes does my employee pay? Your employee contributes to or pays:- Social Security, Medicare, Employee disability, Federal/State Taxes. 3.  How are employee's payroll taxes paid? You, the employer are required to collect the employee's social, security,  and medicare taxes.  Should you fail to collect, you remain responsible to remit these taxes for the employee.  Deducting federal income taxes, and most state income taxes is optional for domestic employers.  If income taxes are not withheld by the employer then the employee is required to make the quarterly payments of any amounts due. 4.  I have heard that I can get a personal tax break for childcare?  Is that true? There are two popular strategies that families use to minimize their personal income taxes.  Many families can utilize a flexible spending plan (cafeteria Plan) offered by their employer for child and dependant care expenses.  Your human resources dept can provied you with plan details.  Another strategy is the Child Care Credit, available to most parents.  This credit can directly reduce the parents income taxes by between $480.00 - $1,550.00 a year. 5.  What could happen if I don't pay these taxes? Failure to report domestic wages after Jan 1, 1995 will compromise the validity of your personal income tax return.  Additionally, there is no statue of limitations on the failure to report and remit federal payroll taxes.  You are most likely to be caught when a former employee files for unemployment or social security benefits.  Employers are generally required to pay back taxes, penalties, and interest charges, and usually professional fees for an accountant and or attorney. I hope this helps some of you out.  These are my most asked questions, as I provide help and information on taxes when my clients take a nanny placement from me. If you need further information on hiring a nanny, Interviewing a nanny, wanting to be a nanny, or any other nanny questions, please feel free to write to me at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Julie McDonnell Uniglobe Nannies