Nanny Taxes — Hiring a Nanny in Washington State (Seattle)

by + on April 1, 2010 at 6:27 pm

If you live in Washington State and hire a nanny, here is the process you need to go through:

  1. Get an EIN: If you pay your nanny more than $1700 in a year (the limit for 2010), you need to pay the federal ‘nanny tax’. You will need to get an Employer Identification Number from the IRS. That can be done easily online or over the phone. Learn more or apply here. Cost: Free
  2. Get a WA State UBI: If you pay your nanny more than $1000 in any quarter, you must pay WA state unemployment taxes. In order to do so you need to get a WA State UBI (Unified Business Identifier). You’ll need your EIN. You can request one online here (although it takes them a few days to actually grant the UBI number). Cost: $15
  3. Receive your WA State Unemployment Tax Notice: You don’t need to do anything specific for this. When you request your UBI, you will automatically be sent an Employment Security Department Tax Rate Notice. This notice tells you how much you have to pay for Unemployment Insurance. We have to pay 1.92% for 2010.

When you hire the nanny, you need to take several steps:

  • Have her fill out a W-4: Documents her SSN and identifies withholdings. Keep this for your records, you do not need to file it. The dependent care form W-10 does not apply if you are hiring a nanny. Available here (pdf).
  • Have her fill out an I-9: Establishes her employment eligibility. Keep this for your records, you do not need to file it. Available here (pdf)
  • Report new hire to DCS. WA State requires that all new hires be reported to the Department of Child Services (DCS) so they can check to see if backup withholding is necessary. You can do that online here.

OK, you and your nanny are now legit.

  • Guest

    Good summary. What do I do now that I have completed all of the above paperwork? How do I calculate the taxes I should pay for my Nanny and when / how do I communicate that to the state / federal?

  • Guest

    I got in over my head when I first hired my nanny and attempted to do some of this stuff on my own. A friend recommended a service that they us, GTM Payroll Services, and I checked them out. I called with a few questions and ended up signing up right away. They got me registered for tax accounts with both the State of Washington and the IRS. The even sent me the employee documents I needed filled out. My friends have been with them for 7 years, and me for one. They withhold and file all of my tax information each quarter, handle any notices I receive, offer my employee direct deposit, and even have insurance options to choose from. I figured with the Year End coming up it might get a little hectic with all of the paperwork needed. Not at all! They are preparing all of the necessary documents for me and my employee come time to file. It you are a busy parent as I am, and don’t have a lot of time to spend with a calculator, then check them out. You can call them or visit http://www.GTM.com. Just passing along the word, as my friend did for me. I hope you can find this helpful!

  • Sarah

    Does this apply to nanny care outside the home as well?

  • Newbie Employer

    Thanks, Dave, I didn’t realize they will mail a tax rate notice for the unemployment tax, was tearing my hair out trying to find how to compute that rate!

    Guest, you may try IRS Publication 926 (household employees) and Publication 15 (some general help).
    http://www.irs.gov/publications/p15/ar02.html
    http://www.irs.gov/publications/p926/index.html

  • http://twitter.com/leggett Michael Leggett

    Thanks so much for this. By far the clearest explanation of what needs to be done.

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