Nanny online payment services - why are they so expensive?

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lightheir
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Nanny online payment services - why are they so expensive?

Post by lightheir » Thu Aug 30, 2018 6:57 pm

I am hiring a part time nanny, all legal-above-board payments including taxes. I am looking for an online service that automates tax computation for nanny payments and takes care of the distribution of funds once I send checks to them.

I'm amazed to see how expensive the online services for nanny payments are, typically north of $600 per year, and closer to $1000/yr.

Why is this so expensive? The one I was referred to doesn't seem to do ANYTHING other than compute and direct deposit payments. I'm thinking I might just compute them myself, since my situation doesn't seem complicated.

If anyone has used these and can comment as to how they save significant time/money, please let me know!

blueman457
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Re: Nanny online payment services - why are they so expensive?

Post by blueman457 » Thu Aug 30, 2018 9:18 pm

Saves time? It's not hard to write a check, but it seemed tedious to track and pay federal, state, and local taxes. There are some computer based software programs that do it for you (glorified accounting software really), and some of the nanny pay services will keep track of your taxes while you write the check (saves you some money there).

I do the full nanny payment just because it's a drop in the bucket compared to my full-time nanny's salary and it saves me significant amounts of time/hassle. Smarter folks can me can do it themselves without issue.

Blue Man

spectec
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Re: Nanny online payment services - why are they so expensive?

Post by spectec » Thu Aug 30, 2018 9:34 pm

I stopped preparing nanny tax reports several years ago because I couldn't meet my profit targets at $350/quarter. And I didn't prepare the payroll checks - I only handled the quarterly reports. When I'm asked about preparing them, I just tell people to use one of the online services because they're CHEAP compared to what most tax preparers have to charge.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

EHEngineer
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Re: Nanny online payment services - why are they so expensive?

Post by EHEngineer » Thu Aug 30, 2018 9:41 pm

lightheir wrote:
Thu Aug 30, 2018 6:57 pm
I am hiring a part time nanny, all legal-above-board payments including taxes. I am looking for an online service that automates tax computation for nanny payments and takes care of the distribution of funds once I send checks to them.

I'm amazed to see how expensive the online services for nanny payments are, typically north of $600 per year, and closer to $1000/yr.

Why is this so expensive? The one I was referred to doesn't seem to do ANYTHING other than compute and direct deposit payments. I'm thinking I might just compute them myself, since my situation doesn't seem complicated.

If anyone has used these and can comment as to how they save significant time/money, please let me know!
It's been about 3 years since I employed a nanny. We paid a company to do everything except make the payment. Cost about $1000/yr and it was 100% worth it. In addition to the paystubs, W4s, W3s, W2s, withholdings, etc, they also handled the notices from the IRS and the State. We probably got 4 or 5 of those over the years and every time the IRS/State was wrong, and I never spent a minute on the phone waiting or stressing about it. All I had to do was forward the notice to the payroll co and they did everything. Super helpful. Then they provided the schedule H and the state tax forms at the end of the year.

I used to write checks, but today I would use Venmo or Apple Pay Cash to deposit their paycheck.

ps. Don't overlook a worker's comp policy to cover your household employee. You want to be covered if your nanny slices off her finger while cutting an apple, or gets in a car wreck while delivering your child to balet class. Some states mandate workers comp.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

jlawrence01
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Re: Nanny online payment services - why are they so expensive?

Post by jlawrence01 » Thu Aug 30, 2018 11:59 pm

Another way of getting around the reporting requirements would be to talk to a temporary agency and negotiate the cost of having them take your domestic employee on as an employee. They take care of all of the taxes, workers compensation, etc. and you have no need to worry about the reporting. Then what you will have a clear record of what you are spending on a Nanny for you child care tax reporting.

HighC
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Re: Nanny online payment services - why are they so expensive?

Post by HighC » Fri Aug 31, 2018 12:21 am

Try SavvyNanny. It is a front end for Intuit at discount prices. Should cost about $400/yr. Well worth it.

mouses
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Re: Nanny online payment services - why are they so expensive?

Post by mouses » Fri Aug 31, 2018 1:32 am

jlawrence01 wrote:
Thu Aug 30, 2018 11:59 pm
Another way of getting around the reporting requirements would be to talk to a temporary agency and negotiate the cost of having them take your domestic employee on as an employee. They take care of all of the taxes, workers compensation, etc. and you have no need to worry about the reporting. Then what you will have a clear record of what you are spending on a Nanny for you child care tax reporting.
Temporary agencies usually pay their employees like dirt, as I understand it.

jlawrence01
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Re: Nanny online payment services - why are they so expensive?

Post by jlawrence01 » Fri Aug 31, 2018 6:53 am

mouses wrote:
Fri Aug 31, 2018 1:32 am
jlawrence01 wrote:
Thu Aug 30, 2018 11:59 pm
Another way of getting around the reporting requirements would be to talk to a temporary agency and negotiate the cost of having them take your domestic employee on as an employee. They take care of all of the taxes, workers compensation, etc. and you have no need to worry about the reporting. Then what you will have a clear record of what you are spending on a Nanny for you child care tax reporting.
Temporary agencies usually pay their employees like dirt, as I understand it.

You set the wages and choose the individual. They handle the compliance work and the accounting. It is all what you negotiate.

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Tamarind
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Re: Nanny online payment services - why are they so expensive?

Post by Tamarind » Fri Aug 31, 2018 7:07 am

I think the why is because they are at the intersection of two high margin industries (software and accounting). Also because the price is set based on the value people find in avoiding the hassle and fear of doing it themselves (and maybe doing it wrong), rather than the cost of doing it.

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TomatoTomahto
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Re: Nanny online payment services - why are they so expensive?

Post by TomatoTomahto » Fri Aug 31, 2018 7:13 am

We no longer have a nanny. I used a spreadsheet to track quarterly reporting requirements. In NJ, what had been a PITA became much easier after the Internet made it to Trenton.

Every quarter, I filed a 940 for household workers for NJ. Annually, I filed NJ summary and Federal. I could pay online.

My guess is that it takes more time to arrange the service than to do it yourself. Mind you, I don’t do my own lawn mowing, house cleaning, file my own taxes, etc., (I’m a lazy SOB), but the nanny reporting requirements were a walk in the park.

ETA: filling out W2 should take you 5 minutes, and that’s if it takes you 4 minutes to open the spreadsheet and find where you put the forms that the government will be happy to send you for free.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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DesertOasis
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Re: Nanny online payment services - why are they so expensive?

Post by DesertOasis » Fri Aug 31, 2018 8:08 am

I employ two aides to take care of my mother in her home. I pay my EMPLOYEE's portion of FICA taxes out of my own pocket. That way, there is no need for any kind of withholding. It's up to my mom's aides, whether they want or need to pay quarterly taxes. Every two weeks I have them sign a timesheet. I give them W2s in January. I carry Unemployment and Workers Comp insurance. I file a schedule H form at tax time. Very easy. The most time consuming thing is withdrawing the cash to pay them. I could do electronic transfer but they prefer being paid in cash, so I do it to please them.

Cash
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Re: Nanny online payment services - why are they so expensive?

Post by Cash » Sat Sep 01, 2018 7:27 am

I've also been asking this question over the past few months as I have researched options. The cheapest I've seen for someone to handle all of the tax stuff while I handle payroll is $500-600 (once you add in all of the unadvertised fees). This is an example: https://www.homeworksolutions.com/what- ... d-pricing/

I've considered doing everything myself, but will probably pay for convenience.

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pondering
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Re: Nanny online payment services - why are they so expensive?

Post by pondering » Sat Sep 01, 2018 1:15 pm

Is there a cheap way to reach the people who want this service? I would guess low cost customer acquisition might be a problem in this market.
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JBTX
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Re: Nanny online payment services - why are they so expensive?

Post by JBTX » Sat Sep 01, 2018 2:05 pm

DesertOasis wrote:
Fri Aug 31, 2018 8:08 am
I employ two aides to take care of my mother in her home. I pay my EMPLOYEE's portion of FICA taxes out of my own pocket. That way, there is no need for any kind of withholding. It's up to my mom's aides, whether they want or need to pay quarterly taxes. Every two weeks I have them sign a timesheet. I give them W2s in January. I carry Unemployment and Workers Comp insurance. I file a schedule H form at tax time. Very easy. The most time consuming thing is withdrawing the cash to pay them. I could do electronic transfer but they prefer being paid in cash, so I do it to please them.
If you are directly paying their FICA, I'm pretty sure that is also considered income to them and is taxable and increases their required FICA.

JBTX
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Re: Nanny online payment services - why are they so expensive?

Post by JBTX » Sat Sep 01, 2018 2:08 pm

jlawrence01 wrote:
Fri Aug 31, 2018 6:53 am
mouses wrote:
Fri Aug 31, 2018 1:32 am
jlawrence01 wrote:
Thu Aug 30, 2018 11:59 pm
Another way of getting around the reporting requirements would be to talk to a temporary agency and negotiate the cost of having them take your domestic employee on as an employee. They take care of all of the taxes, workers compensation, etc. and you have no need to worry about the reporting. Then what you will have a clear record of what you are spending on a Nanny for you child care tax reporting.
Temporary agencies usually pay their employees like dirt, as I understand it.

You set the wages and choose the individual. They handle the compliance work and the accounting. It is all what you negotiate.
I suspect that is a pretty expensive way to handle this. I would imagine they markup close to 100-% over base wage to cover taxes insurance liability overhead and profit.

Saving$
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Re: Nanny online payment services - why are they so expensive?

Post by Saving$ » Sat Sep 01, 2018 7:41 pm

One of the online payroll services like Gusto might work for you. They are $45/, for the first employee, so $540/year.

Nearly A Moose
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Re: Nanny online payment services - why are they so expensive?

Post by Nearly A Moose » Sun Sep 02, 2018 7:53 am

EHEngineer wrote:
Thu Aug 30, 2018 9:41 pm
lightheir wrote:
Thu Aug 30, 2018 6:57 pm
I am hiring a part time nanny, all legal-above-board payments including taxes. I am looking for an online service that automates tax computation for nanny payments and takes care of the distribution of funds once I send checks to them.

I'm amazed to see how expensive the online services for nanny payments are, typically north of $600 per year, and closer to $1000/yr.

Why is this so expensive? The one I was referred to doesn't seem to do ANYTHING other than compute and direct deposit payments. I'm thinking I might just compute them myself, since my situation doesn't seem complicated.

If anyone has used these and can comment as to how they save significant time/money, please let me know!
It's been about 3 years since I employed a nanny. We paid a company to do everything except make the payment. Cost about $1000/yr and it was 100% worth it. In addition to the paystubs, W4s, W3s, W2s, withholdings, etc, they also handled the notices from the IRS and the State. We probably got 4 or 5 of those over the years and every time the IRS/State was wrong, and I never spent a minute on the phone waiting or stressing about it. All I had to do was forward the notice to the payroll co and they did everything. Super helpful. Then they provided the schedule H and the state tax forms at the end of the year.

I used to write checks, but today I would use Venmo or Apple Pay Cash to deposit their paycheck.

ps. Don't overlook a worker's comp policy to cover your household employee. You want to be covered if your nanny slices off her finger while cutting an apple, or gets in a car wreck while delivering your child to balet class. Some states mandate workers comp.
+1 to all of this. Except I still employ a nanny and have the payroll company pay them. I use Breedlove by the way. Yes, it's expensive, but it's really nice to have that added complication in my life right now. Ain't got time for that. Also, the one time the nanny wasn't happy about a payroll issue - how wages were (properly) reported on the W2 - it was nice to have the payroll service as a buffer between us.
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

Spirit Rider
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Re: Nanny online payment services - why are they so expensive?

Post by Spirit Rider » Sun Sep 02, 2018 11:53 am

JBTX wrote:
Sat Sep 01, 2018 2:05 pm
DesertOasis wrote:
Fri Aug 31, 2018 8:08 am
I employ two aides to take care of my mother in her home. I pay my EMPLOYEE's portion of FICA taxes out of my own pocket. That way, there is no need for any kind of withholding. It's up to my mom's aides, whether they want or need to pay quarterly taxes. Every two weeks I have them sign a timesheet. I give them W2s in January. I carry Unemployment and Workers Comp insurance. I file a schedule H form at tax time. Very easy. The most time consuming thing is withdrawing the cash to pay them. I could do electronic transfer but they prefer being paid in cash, so I do it to please them.
If you are directly paying their FICA, I'm pretty sure that is also considered income to them and is taxable and increases their required FICA.
Yes and no.

Not withholding the employee's share. If you prefer to pay your employee's social security and Medicare taxes from your own funds, don't withhold them from your employee's wages. The social security and Medicare taxes you pay to cover your employee's share must be included in the employee's wages for income tax purposes. However, they aren't counted as social security and Medicare wages or as federal unemployment (FUTA) wages. Report the social security and Medicare taxes that you paid in boxes 4 and 6 of your employee’s Form W-2; also add the taxes to your employee’s wages reported in box 1 of Form W-2.

jminv
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Re: Nanny online payment services - why are they so expensive?

Post by jminv » Sun Sep 02, 2018 12:33 pm

lightheir wrote:
Thu Aug 30, 2018 6:57 pm
I am hiring a part time nanny, all legal-above-board payments including taxes. I am looking for an online service that automates tax computation for nanny payments and takes care of the distribution of funds once I send checks to them.

I'm amazed to see how expensive the online services for nanny payments are, typically north of $600 per year, and closer to $1000/yr.

Why is this so expensive? The one I was referred to doesn't seem to do ANYTHING other than compute and direct deposit payments. I'm thinking I might just compute them myself, since my situation doesn't seem complicated.

If anyone has used these and can comment as to how they save significant time/money, please let me know!
Think of the type of person who tends to employ a nanny.

Then think of the time it would take such a person to perform the payroll and tax side of it themselves. It’s not too surprising, then, that the cost of a a very specific service targeted directly with people with nannies (nanny in the name of the business) is correspondingly high.

There are a few free or nearly free payroll services. Look there if you want to cut costs, not something with ‘nanny’ in the name.

michaeljc70
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Re: Nanny online payment services - why are they so expensive?

Post by michaeljc70 » Sun Sep 02, 2018 1:14 pm

I think others have touched on it. You have the computations. The direct deposit. The paystub/statement. Remittances of taxes to state, federal and possibly municipal governments. W-2s. None of those are big jobs, but combined a lot of people don't want to deal with it.

With a service, they have the infrastructure in place to do it cheaply. Let's face it, this is all pretty much done electronically. But they have to provide support staff for calls/issues and of course they need to make money. You have one employee (or contractor). If you have 20 or 2000 employees, you'd get a big discount for this type of service. As others suggested, you don't need a nanny specific service. You need a payroll service.

JBTX
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Re: Nanny online payment services - why are they so expensive?

Post by JBTX » Sun Sep 02, 2018 1:53 pm

Spirit Rider wrote:
Sun Sep 02, 2018 11:53 am
JBTX wrote:
Sat Sep 01, 2018 2:05 pm
DesertOasis wrote:
Fri Aug 31, 2018 8:08 am
I employ two aides to take care of my mother in her home. I pay my EMPLOYEE's portion of FICA taxes out of my own pocket. That way, there is no need for any kind of withholding. It's up to my mom's aides, whether they want or need to pay quarterly taxes. Every two weeks I have them sign a timesheet. I give them W2s in January. I carry Unemployment and Workers Comp insurance. I file a schedule H form at tax time. Very easy. The most time consuming thing is withdrawing the cash to pay them. I could do electronic transfer but they prefer being paid in cash, so I do it to please them.
If you are directly paying their FICA, I'm pretty sure that is also considered income to them and is taxable and increases their required FICA.
Yes and no.

Not withholding the employee's share. If you prefer to pay your employee's social security and Medicare taxes from your own funds, don't withhold them from your employee's wages. The social security and Medicare taxes you pay to cover your employee's share must be included in the employee's wages for income tax purposes. However, they aren't counted as social security and Medicare wages or as federal unemployment (FUTA) wages. Report the social security and Medicare taxes that you paid in boxes 4 and 6 of your employee’s Form W-2; also add the taxes to your employee’s wages reported in box 1 of Form W-2.
Interesting. Didn't know that. I was pretty sure on the income taxes but just assumed same was true on fica.

shipbuilder
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Re: Nanny online payment services - why are they so expensive?

Post by shipbuilder » Sun Sep 02, 2018 2:24 pm

There are two options in this space. You can use a generic payroll service, which is likely cheaper but not tailored to the needs of people who hire nannies and other domestic employees. Or you can use a nanny payroll service, which is likely more expensive but may offer additional nanny-specific services.

For example, some nanny payroll services have insurance brokers who specialize in placing workers comp for domestic employees. This is a very valuable service if such coverage is hard to obtain in your state. Nanny payroll services may also be able to help you set up benefits such as a retirement plan or health coverage -- standard payroll services either can't do this or can do it only for for-profit businesses. We chose one of the prominent nanny-specific services and have been quite satisfied.

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Re: Nanny online payment services - why are they so expensive?

Post by daveydoo » Sun Sep 02, 2018 2:48 pm

lightheir wrote:
Thu Aug 30, 2018 6:57 pm

I'm amazed to see how expensive the online services for nanny payments are, typically north of $600 per year, and closer to $1000/yr.
We did this ourselves for a decade. First year or two was a little perplexing and we made some errors. But we did learn about payroll taxes, etc. After that, it was all fill-in-the-blank and remembering the deadlines.

I think we were the only people we knew who did this legitimately, so kudos to you for trying. But the good news is that my spouse and I can run for public office. :D
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

ThankYouJack
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Re: Nanny online payment services - why are they so expensive?

Post by ThankYouJack » Sun Sep 02, 2018 8:18 pm

lightheir wrote:
Thu Aug 30, 2018 6:57 pm
I am hiring a part time nanny, all legal-above-board payments including taxes. I am looking for an online service that automates tax computation for nanny payments and takes care of the distribution of funds once I send checks to them.

I'm amazed to see how expensive the online services for nanny payments are, typically north of $600 per year, and closer to $1000/yr.

Why is this so expensive? The one I was referred to doesn't seem to do ANYTHING other than compute and direct deposit payments. I'm thinking I might just compute them myself, since my situation doesn't seem complicated.

If anyone has used these and can comment as to how they save significant time/money, please let me know!
I use Intuit Online Payroll. It's a little over $30 a month. Or just do the taxes yourself using a spreadsheet.

Leemiller
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Re: Nanny online payment services - why are they so expensive?

Post by Leemiller » Mon Sep 03, 2018 8:11 am

We use Breedlove, and I think they are great. I’ve always been happy with their customer service. One added benefit is they inform you of state law requirements and changes in law. In Maryland, there is a requirement to have a written contract with specific provisions within it. Another recent law change mandates tracking sick leave. They calculate it for us and keep us up to date on changes. Maybe it is different for other states, but I found Maryland in particular to be a huge pain (and I used to prepare taxes for a living!).

FWIW, I know an attorney who was sued by her former nanny for failure to pay overtime for being on call overnight. The nanny won.

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Re: Nanny online payment services - why are they so expensive?

Post by pondering » Mon Sep 03, 2018 9:37 am

Being on call is not overtime pay, while additional hours would be paid at the overtime rate.

Whether nonexempt employees must be paid for their on-call time depends on whether they are "waiting to be engaged" or are "engaged to wait" as defined by the Fair Labor Standards Act (FLSA).

Source: https://www.shrm.org/resourcesandtools/ ... 20208.aspx
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Spirit Rider
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Re: Nanny online payment services - why are they so expensive?

Post by Spirit Rider » Mon Sep 03, 2018 11:44 am

If you establish your payroll account at Bank of America ($14/month or $3K minimum balance) and you do a direct deposit to a nanny's BoA account (fee waived). BoA has a no cost semi-automated option for Basic Intuit Online Payroll:
  • Federal, state, local and voluntary withholding.
  • Federal electronic 1-click tax filings, payments and printable, signature-ready federal tax forms.
  • You will have to do any state or local tax filing, payments and forms yourself.
  • It will integrate for workmans' compensation insurance with AP Intego.
  • You will have to do employee onboarding (W-9, W-4, etc...) yourself.
This is a partial step between doing it all on your own, a fully automated payroll option or a full service nanny system.

Intuit Online Payroll for Household Employers was discontinued 1/1/2017.
Last edited by Spirit Rider on Mon Sep 03, 2018 5:10 pm, edited 1 time in total.

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Re: Nanny online payment services - why are they so expensive?

Post by rcjchicity » Mon Sep 03, 2018 3:30 pm

HighC wrote:
Fri Aug 31, 2018 12:21 am
Try SavvyNanny. It is a front end for Intuit at discount prices. Should cost about $400/yr. Well worth it.
+1. We used Savvy Nanny Payroll as well.

Cash
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Re: Nanny online payment services - why are they so expensive?

Post by Cash » Mon Sep 03, 2018 3:57 pm

Spirit Rider wrote:
Mon Sep 03, 2018 11:44 am
If you establish your payroll account at Bank of America ($14/month or $3K minimum balance) and you do a direct deposit to a nanny's BoA account (fee waived). BoA has a no cost semi-automated option for Basic Intuit Online Payroll:
  • Federal, state, local and voluntary withholding.
  • Federal electronic 1-click tax filings, payments and printable, signature-ready federal tax forms.
  • You will have to do any state or local tax filing, payments and forms yourself.
  • It will integrate for workmans' compensation insurance with AP Intego.
  • You will have to do employee onboarding (W-9, W-4, etc...) yourself.
This is a partial step between doing it all on your own, a fully automated payroll option or a full service nanny system.
Interesting option. However, the FAQ says this (emphasis added):
What types of businesses can benefit from Intuit® Online Payroll?
Intuit® Online Payroll has been designed expressly for businesses with less than 150 employees. It's ideal for small businesses as well as non-profit employers. It is not for individual use in paying household employees. Intuit® Online Payroll is only for companies located in the United States and is not available in U.S. territories.
I wonder what would be different about paying household employees.

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Re: Nanny online payment services - why are they so expensive?

Post by Spirit Rider » Mon Sep 03, 2018 4:41 pm

Cash wrote:
Mon Sep 03, 2018 3:57 pm
Interesting option. However, the FAQ says this (emphasis added):
What types of businesses can benefit from Intuit® Online Payroll?
Intuit® Online Payroll has been designed expressly for businesses with less than 150 employees. It's ideal for small businesses as well as non-profit employers. It is not for individual use in paying household employees. Intuit® Online Payroll is only for companies located in the United States and is not available in U.S. territories.
I wonder what would be different about paying household employees.
Hmm, interesting catch. Myself and several others I know used it through BOA for years. I don't know if that restriction applies to use thru BoA, as it clearly doesn't apply to Savvy Nanny.

To my knowledge, the only differences with ordinary employees is that you do not have to withhold FICA if wages are < $2100/year and Unemployment Insurance < $1000/quarter. In which case with a withholding exempt W-4, there is no need to run payroll at all.

P.S. Mystery solved. Intuit Online Payroll for Household Employers was discontinued 1/1/2017. Household Employment Taxes are filed on Form 1040 Schedule H instead of Forms 940, 941 and 944. So the regular Intuit Online Payroll will not work.

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Re: Nanny online payment services - why are they so expensive?

Post by Cash » Mon Sep 03, 2018 5:32 pm

Spirit Rider wrote:
Mon Sep 03, 2018 4:41 pm
P.S. Mystery solved. Intuit Online Payroll for Household Employers was discontinued 1/1/2017. Household Employment Taxes are filed on Form 1040 Schedule H instead of Forms 940, 941 and 944. So the regular Intuit Online Payroll will not work.
There we have it. Thanks! I’ve run into this issue with other companies that offer payroll services, but not for household employees.

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