- Licensed family day care is often more convenient and affordable than center care, providing child care services in a small group environment. Although state guidelines for home day care vary, family programs typically allow an enrollment of four to 12 children. Since licensed in-home day cares are housed in the primary provider's home, the provider is considered self-employed rather than an employee of the program's day care clients.
- Nanny taxes include Social Security, Medicare and the Federal Unemployment Tax Act, or FUTA. You only pay nanny taxes if you hire a provider to come to your home and care for your children and if you pay that provider more than a specified amount. As of 2010, the income threshold for household employee tax is $1,700, according to the Internal Revenue Service. If you pay a caregiver more than this amount to provide child care in your home, you must pay applicable Social Security, Medicare and FUTA taxes on your employee.
- Since a licensed in-home day care provider works from his or her own home, household employee taxes are not applicable. Your provider will be responsible for paying Social Security, Medicare and FUTA taxes on her income, if applicable, but these taxes are the provider's responsibility and not the client's. In this case, your financial responsibility to your day care provider extends only to weekly fees for day care services and any registration or activity fees outlined in the day care's fee policy.
- The nanny tax and the self-employment tax serve the same purpose, with the primary difference being the responsible party. If you hire someone to come into your home to care for your children, you are the employer, and therefore are responsible for filing employee taxes. On the other hand, your child's licensed in-home day care provider needs to file self-employment taxes in order to comply with legal obligations to pay Social Security and Medicare taxes, according to the IRS.
Identification
Tax Responsibility
Clarification
Considerations
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