Babysitter/Nanny Tax Info for Georgia Residents

We employ an in-house sitter for our child 20 hours/week. This page represents a summary of my attempts to figure out the legal necessities with regard to tax witholdings for household employers. In hindsight, I'm a glutton for punishment -- it's definitely easier to hire an accountant. But it should not be so difficult to hire and pay a household employer! Ironically, the feds probably make it the easiest (see comments at the end) -- it is the state that is the hardest to figure out.

Do I need to withhold federal and state taxes for my employee?

• Federal income tax witholding is up to you and your employee.
• State income tax witholding is up to you and your employee.
• If your employee is over 18 and paid more than $1300 (in 2001), then you'll need to withold and pay Social Security and Medicare taxes. You also need to pay state Dept. of Labor Unemployment Taxes (see next question).

Of course, your mileage may vary ...

What about state unemployment taxes?

I only discovered this when I started to work on my federal tax return. You also may need to pay state unemployment taxes. Of course, this has nothing to do with income taxes, and you need to go to a totally different state agency (Department of Labor) to find this out. As far as I can tell, even the aforementioned Employer's Tax Guide doesn't tell you this (they should rename it the Employer's "Income" Tax Guide).

Off to the Department of Labor's Unemployment Insurance WWW site. According to their FAQ, "domestic employers with a payroll of at least $1,000 in any calendar quarter" need to pay it. By the way -- expect this to be 2.7% of gross pay, and this is an employer contribution (i.e. not deducted from your employee's pay).

Anything else?

So what do I have to do?

I'm going to assume that you are going to withold federal income, social security, and state income taxes. You will also have to pay state unemployment taxes for your domestic employee (but you cannot deduct this from your employee's pay in Georgia)..

As far as software goes, I highly recommend Nanny Pay -- it is well worth the money for the time it saves. But you still have to fill out the forms yourself. It's not too hard once you've done it once or twice ...

SUMMARY of what I have to do to pay a nanny or sitter. The bottom of this page has links to web sites with all the relevant forms.

• Initially
• Obtain a federal employee ID #
• Obtain a State of Georgia Dept of Revenue employee ID # for tax witholdings (State Tax Registration Application Form CRF-002)
• Obtain a State of Georgia Dept of Labor employee ID # (Form DOL-1A)
• When hiring someone
• Have them fill out IRS Form W-4, DOJ form I-9, and GA Form W-4
• Report the new hire to the Dept of Labor on next quarterly report
• Report the new hire to www.ga-newhire.com -- The Georgia New Hire Reporting Center.
• Every paycheck
• Deduct federal taxes
• Deduct state taxes
• Provide a statement to employee
• Quarterly
• Submit witholdings to State Dept. of Revenue
• Pay 2.7% unemployment tax to Dept. of Labor
• Annually
• Submit federal tax, unmeployment tax (not witheld, but due) and Social Security/Medicare (witholding plus employee's contribution) to the federal government via Schedule H of the 1040.
• Submit Social Security / Medicare witholding report to the Social Security Administration
• Purchase blank W-2 (you need to buy forms with special red lines) to do the above
. Why can't the IRS or SSA provide a color PDF file like they already do with tax forms?

• Surprisingly, the federal government is the easiest to deal with. Allowing us to submit everything via Schedule H is convenient, and obtaining an employee ID # is painless.
• Why doesn't the State Dept. of Revenue inform applicants that they probably need to obtain a Dept. of Labor number for paying the unemployment tax as well? Obviously most applicants will have to do both.
• The state is hard to deal with. They are much slower in their mailings than the federal goverment. Both the Dept. of Revenue and Labor had spelling errors on my name or address, and this took over a year to fix despite submitting multiple correction forms.
• After you submit the necessary paperwork, all the needed forms for quarterly reporting to the state will be sent to you.

1. Hire a local accountant to do all the work.
2. Hire an online company who specializes in "Nanny Taxes" to do all the work. There are several, and you'll pay several hundred dollars per year for them to take care of all the paperwork.

• Georgia Taxpayer Registration Forms -- Form CRF-002 is needed to obtain a state tax witholding number.
• Georgia Department of Revenue Publications and Forms
• Georgia Department of Labor Unemployment Insurance Forms -- Form DOL-1A is needed to obtain a DOL account number for submitting unemployment insurance.
• Georgia Department of Labor Unemployment Insurance General Information
• Georgia New Hire Reporting Center
• IRS Forms and Publications
• The I-9 form, required by the Department of Justice, verifies an employees eligibility to work. If the employer cannot provide the identifications listed on the form, you cannot hire them.

Another good source for much of this info (thanks for the email pointers): http://www.householdemploymenttaxes.com/

Comments? Criticisms? Please send me email. Many thanks to those (CPAs and household employers) who have sent me feedback.

Last Updated: 18-August-2002

Rob Butera