Hiring a nanny is not easy. Besides finding the right person to care for your child, you have to consider how to pay your new household employee. This includes wages and taxes. Washington State is one of the few states that does not have a state income tax. However, in Washington there are other nanny taxes to consider.
No Washington State Income Tax
Washington state does not have a state income tax. However, it is important to remember that federal state incomes taxes still apply. Nannies are household employees and you have to pay federal taxes on household employees. If you pay your nanny more than $1,700 in a year, you must withhold social security and Medicare taxes from your nanny's paycheck. This is 7.65 percent of their wages. You also have to pay the employer's share of these taxes to the Internal Revenue Service, or IRS.
Washington State Employment Security Tax
Washington state requires employers to pay employment security taxes on nannies, if the nanny makes more than $1,000 a quarter. To do this, an employer must first obtain a Washington state unified business identifier, or UBI, number. You can apply for one on the Washington State Employment Security Department website. The department will then send quarterly statements for the employer to pay. The rate is around 1.92 percent of the nanny's wages.
The Washington State Department of Labor and Industries does not require employers to have workman's compensation coverage for one employed nanny. However, if an employer has two or more nannies who work 40 hours or more regularly, per week, then all the nannies must receive workman's compensation insurance coverage. The department requires employers to file quarterly reports that document the number of hours an employee works. This information determines the rates for employers to pay.
Documents to File
Employers should have their nannies fill out an IRS W-4 form before starting employment. The W-4 will assist the employer in determining the amount of withholdings for federal tax purposes. The IRS also requires an I-9 be filled out by each employee to verify that the individual is legally able to work in the U.S. There are no specific state forms for Washington state nannies to fill out due to the lack of a state income tax.