Welcome To NannyPay News
Volume 2, Issue 1 (July 2005)
It is intended to provide household employers and NannyPay users with information about employment issues, tax tips, NannyPay software tips, and other items of interest in a brief, easy-to-read format.
If you have any comments or suggestions about our newsletter, please let us know by emailing us at: newsletter@essentia-soft.com. We look forward to your feedback.
Meet Robin — Our New Marketing and Sales Manager
Please welcome Robin Giese, our new Marketing and Sales Manager. Robin plays such an important role for the company that we thought all our customers should meet her. Robin was born and raised in Grand Rapids, Michigan, and moved to suburban Philadelphia about ten years ago. Robin brings to the company over 13 years of marketing and sales experience. She is also a Girl Scout troop leader and has served as a volunteer for the past seven years at a local watershed conservancy as a marketing consultant and environmental educator for children. She has written many articles on childcare issues and has been published in Family Fun Magazine.
As a mother of two young daughters, Robin is astutely aware of the challenges faced by today's parents, including the difficulties in finding and maintaining quality, affordable childcare. She also understands the importance of treating employees as professionals, which is such an important reason for using NannyPay®.
If you have a web site and would like to promote NannyPay®, please let Robin know and she will send you information about our incentive programs. But even if you don't and you have questions about Essentia Software or NannyPay®, or if you just want to say "hello", feel free to write Robin at: rgiese@nannypay.com.
Nanny Tax Tip — Paying your Employee's Share of FICA taxes.
The Federal Insurance Contributions Act (FICA) provides for a federal system of old age, retirement, disability, and health benefits for workers and their families. This system is financed through Social Security and Medicare taxes.
For Social Security, the combined tax rate is 12.4%, you and your household employee each paying 6.2% on the first $90,000 of wages. For Medicare the combined rate is 2.9%, you and your employee each paying 1.45% on all wages. Ordinarily you withhold your employee's share of Social Security and Medicare taxes from your employee's wages at the time of payment.
You may not know, however, that as a household employer, the government also offers you the option of paying your employee's share of Social Security and Medicare taxes, in addition to your own. This may be advantageous to your employee because it increases her take home pay; it may, however, increase your tax liability. If you choose this option, remember that the government considers the Social Security and Medicare taxes you pay on behalf of your employee to be additional income to your employee. Therefore, these taxes must be included in your employee's wages as additional income. Those amounts do not, however, count as Social Security and Medicare wages (FICA wages) or as Federal Unemployment Tax wages (FUTA wages). Here is an example of how taxes are calculated if you choose to pay your employee's share of FICA:
Suppose you hire a household employee and agree to pay him or her cash wages of $100 per week. Because you expect to pay your household employee $1,400 or more for the year, you are required to withhold and pay FICA on these wages. You decide to pay your household employee's share of FICA taxes from your own funds, and, accordingly, you do not withhold any Social Security or Medicare taxes. For each wage payment of $100 to your household employee, you will ultimately owe the government $15.30: your household employee's $6.20 Social Security tax plus $1.45 Medicare tax , and your $7.65 share of the same taxes.
For income tax purposes, your household employee's taxable wages each pay day will be $107.65 ($100 plus the $7.65 share of Social Security and Medicare taxes you will pay on your household employee's behalf). This amount is often referred to as the "grossed up" wage amount. Federal income withholding tax will be calculated on $107.65 in cash wages, not $100.
NannyPay® is one of the few payroll applications that will automatically calculate the gross up and use that figure for calculating federal and state withholding taxes. See the NannyPay® Software Tip on how how to take advantage of the employer-paid FICA option.
NannyPay Tip — Paying Your Employee's Share of FICA taxes
Here's how to setup NannyPay to pay your employee's share of FICA taxes:
- Navigate to the NannyPay Setup Window;
- Click on the "Federal" tab and check "I will pay my household employee's share of FICA taxes."
That's all there is to it. If you run an "Employer's Liability" Report, your liability for Social Security and Medicare taxes will be shown. When you calculate your employee's withholding taxes, no amounts will be deducted for Social Security or Medicare. If you have further questions about the Employer-Paid FICA option, don't hesitate to email techsupport@nannypay.com.