Don't think these two topics have anything in common? Well, their limits for 2013 were just announced by the Social Security Administration.
Nanny Tax: If you pay for domestic service (babysitter, housekeeper, home health aide, dog sitter, etc.) in your house more than $1800 for the year, then you are an employer subject to FICA. This little rule has dashed the hopes of more than one political hopeful over the years. As an employer you are responsible for:
- Verifying immigration status through a Form I-9
- Obtaining Employer Identification Number (EIN) to put on the tax forms you will be filing
- Withholding Social Security and Medicare Taxes (15.3% of the employees salary, with the payment being split between the employer and the employee)
- Paying federal and state unemployment taxes
- Paying state workers compensation insurance
- Filing Schedule H, Household Employment Tax Form, with your 1040 each year
Don't feel like paying? Besides the whole tax fraud issue, think about the fired nanny who files for unemployment and can't get it, and the state now targets you for lack of compliance. Also, what if the person is hurt on the job - how much umbrella insurance do you have? And if the nanny who worked for you for years doesn't pay into social security, she won't have anything when she dies.
Social Security Wage Base: In 2013 you will be paying Social Security Taxes on your income up to $113.700 (this is up from $110,100 in 2012 reflecting an upward tick in total wages.
Employers will pay 7.65%: 6.2% for Old Age, Survivors and Disability Insurance (OASDI; aka "Social Security tax"), and 1.45% for Hospital Insurance (HI; aka "Medicare Tax").
Employees will pay :
- 6.2% Social Security tax on the first $113,700 of wages (ie up to $7,049.40), plus
- 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
- 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return)
In short, regardless who has been elected, your taxes are going up next year.
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