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nanny tax

A nanny tax—also known as a household-employment tax—is not a legal term, but refers to a federal social security tax imposed on the employer of a domestic employee (such as a nanny) if the employer pays the employee more than a specified amount in total wages in a year.

In Illinois, as in other states, the 'nanny tax' refers to federal tax obligations that apply to individuals who employ household employees, such as nannies. If an employer pays a nanny or other household employee cash wages of $2,300 or more in 2021 (this threshold may change annually for inflation), they are generally required to withhold Social Security and Medicare taxes and may also be responsible for paying federal unemployment tax. Employers must also provide their employee with a Form W-2 and report the wages to the IRS and the state. Additionally, Illinois employers may be subject to state unemployment taxes and should report any wages paid to household employees to the Illinois Department of Employment Security (IDES). It's important for employers to comply with these requirements to avoid penalties and interest charges.

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Taxes

nanny tax

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Taxes

nanny tax

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