Disclaimer: This is an educational guide only and is not a replacement for a tax professional. Please speak with an attorney and accountant for further guidance. In spite of our best efforts, we do not guarantee the accuracy of this information.
Why should I care about payroll taxes, if I’m using payroll services?
The the IRS reminds us:
You’re responsible to ensure that tax returns are filed and deposits and payments are made, even if you contract with a third party to perform these acts. You remain responsible if the third party fails to perform any required action.https://www.irs.gov/pub/irs-pdf/i1040sh.pdf
As a household employer, you’ll need to pay taxes on the wages and/or salaries of any employees.
One of the smaller components of payroll tax is the unemployment tax, a levy of concern to both the state (also known as state unemployment tax or “SUTA”) and federal government (federal unemployment tax “FUTA”).
Washington State Unemployment Tax:
For those of us in Washington State, you won’t need to pay state or federal unemployment taxes until you hit $1000 in wages/salaries per quarter. The Employment Security Department governs unemployment benefits and associated taxes paid by the employer. Questions specific to their divisions can be answered at 1-855-829-9243 or via a number of other contact methods: https://esd.wa.gov/employer-taxes/businesses-contact
How much is the tax in Washington State?
For new employers (the household is considered an employer) the estimated tax rate for “domestic services” would be 0.13%. So if your nanny’s annual gross wages are $35,000, that equates to only $45.50 per year. Nothing to worry about there–the important point is that you’re paying it so you avoid any penalties.
Federal Unemployment Tax
FUTA ends up being a modest tax due to a credit associated with unemployment taxes paid to the state. The FUTA rate is 6%, however employers typically receive a tax credit of 5.4%, effectively making it only 0.6%.
If you need more info about outsourcing your payroll duties, check out the IRS guide here.
Further Resources on Nanny Unemployment Taxes in Washington: