Finding and hiring the best employees to work in your home can be a challenge, but so can navigating the complicated world of payroll and taxes. If you have never hired domestic employees before, the financial aspects of this arrangement might seem intimidating.
Fortunately, there are household employee payroll services (for nannies and other types of employees) available to help you navigate these details, and Pavillion Agency can help make the payment process go smoothly and easily.
The Basics of Household Employee Payroll
First, verify with a financial professional whether the person you have hired is legally considered to be an employee. To set up payroll for a household employee, you’ll need to check which taxes will apply to that employee and perhaps apply for an employer identification number (EIN). At that point, you and your employee will need to complete certain documents, discuss workers’ compensation insurance, and file a new-hire report with the appropriate state agency.
Common documents required to set up household payroll service include a Form W-2 (Wage and Tax Statement), Form W-3 (Transmittal of Wage and Tax Statements), Form W-4 (Employee’s Withholding Certificate), and Schedule H (Form 1040, Household Employment Taxes). Meanwhile, a Form I-9 will verify that your employee is legally allowed to work in the U.S.
Nanny Payroll Services Available
While some families and individuals handle their own accounting and run their own household payroll services, others contract this work out to experienced professionals. There are payroll providers and software services available that handle tax withholdings, automatic payroll processing, and state and federal compliance. Some payroll services even include 24/7 customer support, flexible pay options, and a nanny time tracker. Each employer has to weigh the pros and cons of the costs of these services based on the household budget and the employee’s rate of pay.
Challenges with Nanny Payroll
With nannies in particular, it is important to understand what you will need to withhold and pay for “nanny taxes.” These may include Social Security tax, Medicare tax, and federal and state unemployment taxes. There are some exceptions to nanny tax rules, such as if you pay your nanny less than a certain amount per quarter or per year.
As a household employer, you’ll need to calculate the amount of taxes to pay and withhold, which varies based on the agreed rate and your employee’s tax bracket. To avoid tax penalties, it is generally recommended to pay quarterly payments to the IRS and meet deadlines for annual filing requirements.
Let Pavillion Handle Your Payroll
Back in 2006, Pavillion Agency, the leader in domestic staffing since 1962, recognized a need for one-source payroll processing and created the Pavillion Group. This add-on service offers not only payroll processing, but also tax compliance and reporting, as well as benefits consultation and administration. We can also help you with workers compensation, disability insurance compliance, and other special projects related to your household staff. This is the most efficient and cost-effective way to manage the financial aspects of having household staff and avoiding all of the red tape that you would otherwise be burdened with.
Contact us today to learn more about how Pavillion Group can assist you with payroll processing and benefits administration. Call us at 212-889-6609 or email us at [email protected], and we will be happy to explain how these services work and what we need from you to get started.
