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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 Michigan, as in other states, the 'nanny tax' refers to federal tax obligations that apply to individuals who employ household employees, such as nannies. If a household employer in Michigan pays their nanny or other domestic workers more than the federal threshold amount ($2,300 for 2021, which is subject to change in subsequent years), they are required to pay Social Security and Medicare taxes. These taxes are often referred to as 'FICA' taxes. The employer is responsible for withholding the employee's share of these taxes and paying the employer's share, as well as providing their employee with a W-2 form. Additionally, if the total wages paid to all household employees exceed a certain amount ($1,000 in any calendar quarter for 2021), the employer must also pay federal unemployment tax (FUTA). Michigan employers may also be subject to state unemployment taxes and should register with the Michigan Unemployment Insurance Agency if they meet the state's employment criteria. It's important for employers to keep accurate records of all payments and taxes as they are responsible for reporting them to the IRS and the state tax agency.

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Taxes

nanny tax

Individual & Family Legal Plan

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Michigan State Code

Taxes

nanny tax

Michigan State Code

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