Nanny share - going rates, services for paying taxes and withholding

 We are currently exploring the possibility of setting up a nanny share and talking to potential partner families. If you are in this situation, and can provide advice on any of the following, it would be much appreciated:

1) what are you paying for a two child nanny share, per child per hour?   Please specify net or gross!  

2) What do people do about reporting income to state and federal authorities and also about withholding? Do most people simply pay the nanny gross wages (and pay the govt payroll (employer side) taxes) and leave it to the nanny to pay income tax, SDI, etc.? Or is it more common practice for the employer to handle all of these things for the nanny?

3)  what service, if any, do you use to calculate employer side tax, and various deductions from nanny wages?   It looks like you can do this manually yourself, but it is fairly complicated.   I have heard good things about, but is more expensive, and I've also read that Sure Payroll is very good but less expensive. 

4) most of the information I've seen online concerns one household employer and one nanny. How do you handle all of this with two households paying one nanny's wages?

5) any other hot tips or "things you wish you'd known" before you started this process would be much appreciated!

Parent Replies

New responses are no longer being accepted.

I would strongly encourage you to consult a tax attny.  But to give you some info/things to consider in case it's helpful:  We don't do a nanny share but pay our nanny over the table via Intuit's payroll service. It costs $22/month and I believe it's worth it--you plug in all the info and it calculates your taxes, populates the forms, sends reminders, etc. It also pays her via direct deposit.  I don't believe it's legal for you to expect her to pay the SDI, ETT, and not withhold CA state Income tax. The CA tax payments would be fairly straightforward to split as (I think) because it's really not that much money and you pay it either quarterly or at the end of the year, but it could get a bit more complex on the federal side when you file if one family is the employer and you both want to take advantage of federal childcare credits or want to list the childcare expenses on your return.  I personally would not be comfortable waiting until the end of the year to count on the other family to pony up their share of the outstanding federal taxes if we were the only one reported as the employer. I suppose you could work out an arrangement where monthly/quarterly the other family paid you their share of the withheld tax and employer-paid SS, etc. so that you don't have to worry about holding the bag on that when you file your federal return.