Saturday, January 2, 2010

Nanny Tax Time

Tax time is upon us - well, at least me - I like to start working on income tax stuff as soon as the year starts, because I want to know as early as possible how much I'll be getting back (or perish the thought, owe). This year will be especially "fun" as I have to file all sorts of crap for the taxes involved with having a nanny, who is an "employee" of a "business."

I could do it all on paper, but I'd rather not figure it out to that level of detail, and payroll taxes are such a pain that it simply isn't practical anyway. So I got software to handle that - Quickbooks. And then now I find out that this won't handle the year-end tax stuff - W-2s - so I had to order a pack of those. The payroll stuff requires a subscription that costs 300 or more per year (but comes free with the software for the first year - maybe I'll have to upgrade it every year anyway). So on top of the taxes themselves, I have had to pay 150 for software plus another 80 for W-2 stuff. Hopefully that will be all I need to file.

It is too bad I don't have the W-2 stuff yet or I could take care of it all this holiday weekend.

Still, the software makes it relatively painless, if time consuming - you have to fill out and send in like 4 separate forms every quarter and then those four forms plus a few more for the year. Some go to State, some go to Federal. At least I don't have to do local government - I don't live in an area that has city income taxes or anything like that.

To pay the nanny taxes, I have a separate checking account set up - every two weeks (when I pay the nanny) I transfer into there the full amount (including taxes owed) and then write the check for after tax from that account to the nanny. (I do the transfer electronically/online - very convenient). That way, the account has all of the taxes needed come tax time and since the amounts were all deduced from the main checking everty two weeks, I have a nice, even accounting of the true costs of the nanny each pay period.

This year-end taxes thing will now be the last thing I have to figure out - hopefully once I've been through this process once, it will be easier (and more understandable) for subsequent years. Still, I can't wait til we don't have a nanny anymore - the paperwork and expense is a pain. Only three and a half more years or so until my son starts Kindergarten. Then we'll have to figure out before and after school, but that should be much cheaper.

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