How to Pay Your Nanny Legally in RI

How to Pay Your Nanny Legally in RI

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Are you hiring a nanny in Rhode Island? It’s important to understand your legal and tax requirements in order to know how to pay your nanny legally in RI. Paying your nanny “under the table” or failing to submit proper state and federal paperwork can result in legal and financial ramifications down the line.

Nanny Tax Requirements in RI

Here’s a step-by-step guide on how to pay your nanny legally in RI:

  1. Determine if your nanny is an employee: If you hire a nanny to work in your home, they are considered a household employee, and you are their employer. This means you are responsible for withholding and paying certain taxes on their behalf, including the “nanny tax“.
  2. Complete an I-9 Form: Print out an I-9 form for your nanny to fill out after accepting the job offer (no later than the first day of work).
  3. Understand RI unemployment insurance tax: Rhode Island requires a new employer state unemployment insurance tax of 1.09% for the first $28,200 wages paid to each employee.
  4. Pay Job Development Tax Fund: Household employers in RI must pay an assessment of 0.21% to support the Rhode Island Human Resource Investment Council (HRIC).
  5. Temporary Disability Insurance Tax: Rhode Island employees are required to pay a disability insurance (TDI). This program provides short-term assistance to employees who are unable to work due to an injury or illness not related to work. Employers are required to withhold this tax from their employee’s paycheck. You must also submit quarterly payments with their unemployment and job development taxes. The Rhode Island TDI tax rate is 1.1% on the first $84,000 in wages for each employee.
  6. Understand RI Sick and Safe Leave: Under Rhode Island’s Healthy and Safe Families Workplace Act, employees have the right to take time off from work when they are too sick or injured to work. Employees can also use earned leave to care for a sick or injured child, spouse, domestic partner, or other household member. While employers with fewer than 18 workers must provide sick and safe leave time, legally it does not need to be paid in RI – though strongly consider nanny industry standards when making this choice.
  7. Consider Workers’ Compensation Insurance: Household employers in Rhode Island are not required to have workers’ compensation coverage for any employees. However, you can choose to purchase a voluntary policy to protect both you and your employee. 
  8. Issue pay stubs: Several states have domestic worker protection laws that require families to issue pay stubs with their nanny’s pay that provide details like hours worked, pay rate, overtime hours, paid time off, and more. Make sure to issue pay stubs to your nanny to comply with labor laws.
  9. Year-end requirements: Create a W-2 form by gathering your nanny’s wage and tax information. You will need to know how much you paid your nanny in gross wages (including any bonuses and overtime pay), federal and state tax withholdings, and Social Security and Medicare taxes. Use this information to create a W-2 form for your nanny. You must also prepare a Schedule H with your family’s individual tax return(s).
  10. Consider using a payroll company:payroll service can help you calculate and withhold taxes, file tax forms, and keep accurate records.

Understand how to pay your nanny legally in RI

There are several requirements to pay your nanny legally in Rhode Island. If this feels daunting, you’re not alone! Many families utilize a professional payroll service and tax professionals to ensure they are paying their nanny legally.

Before you hire a nanny in RI, understand state household employment tax, payroll, and labor laws. To learn more about your federal obligations as a household employer, read the IRS’s Publication 926 – Household Employer’s Tax Guide.