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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 Minnesota, 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 Minnesota pays their nanny or other domestic workers more than the threshold amount set by the Internal Revenue Service (IRS) for a given tax year (for example, $2,300 in 2021), they are required to withhold and pay Social Security and Medicare taxes. These taxes are collectively known as FICA taxes. Additionally, if the total wages paid to a nanny exceed a certain amount ($1,000 in a calendar quarter, as of 2021), the employer must also pay federal unemployment tax (FUTA). Employers are responsible for reporting these taxes using Schedule H (Form 1040) and may need to pay estimated taxes quarterly. It's important to note that these requirements are based on federal law, and state-level tax obligations may also apply, such as unemployment insurance taxes. Employers in Minnesota should consult with an attorney or a tax professional to ensure compliance with all applicable tax laws.

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Taxes

nanny tax

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Minnesota State Code

Taxes

nanny tax

Minnesota State Code

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