Is this 2008 estimated tax correct?

Question

I'm having some trouble estimating my 2008 taxes, including social security and medicare.

I am single no kids and will have made $27,000. I work as a nanny, which I believe classifies as household employee, and not self employed.

By my estimates I should get a $5,450 deductible and a $3,500 deductible to make my taxable income $18,000. Using the 15% + 802.50 for over $8025 but less than $32,500 I get $2302.50 in federal taxes.

I assume that social security and medicare is separate from this and I used 7.65% (not self employed) to get $1377, for a total of $3679 a year, or $306.58 a month, or $76.65 a week.

I'm not sure at all of these numbers, but hope the real amount isn't much more that this! I can afford that much, but not more. Also I don't know who to send the money to or when. Also not sure my employers are paying their parts of the medicare and SS, if they are not, do I take standard deductions from things like getting my car fixed and eating lunch?

Answer 1

Here's a link to the IRS estimated payments form.  It has instructions and a worksheet so you can estimate how much you will owe.  There are also payment vouchers and it tells you when and where to send payments.  

http://www.irs.gov/pub/irs-pdf/f1040es.p...

Answer 2

I see two possibilities.

First, the less likely, is that you should be considered an independent contractor.  In this case, your "employer" will give you a 1099-MISC by January 31, and you are responsible for all your taxes and both halves of Social Security and Medicare.  I can't eliminate the possibility if you've had special training, but it's still unlikely.  In this case, your self-employment tax would be approximately $27,000 x 15.3% x (1 - (15.3%)/2), which is about $3815.  It would be due, in addition to the income tax you've calculated, with your regular tax return.

If you are a household employee, then it's likely that your employer will have to register as a household employer with the state (in California, it's within one month of the first calendar quarter in which she pays $1000 to all household employees), and is required to deduct or "gross up" the employer's share of Social Security and Medicare.  In this case, you should receive a W-2 by January 31.  Contrary to the generally accurate answer from "v b", income tax withholding is not required, so you may want to pay estimated taxes.

Either your employer is required to withhold social security (withholding $2065.50 from your $27,000, and paying $4131 to the IRS), or to "gross up" your pay.  In the latter case, she would recalculate the amount paid on the W-2 as $27000 / (1 - 0.153/2) = $29,236.60, and pay $4473.20 to the IRS.)

You probably will not be able to itemize deductions, and the cost of getting your car fixed and eating lunch almost certainly won't be deductible.  However, if you employer provides lunch, it shouldn't be taxable.

Answer 3

If you are an employee, your employer deducts the 7.65% fica/mc BEFORE they give your pay.  Based on your W-4, they also withhold for federal and state taxes.  For federal, if you used single/2 on the W-2,. this would work out to $43/week.

Go to www.paycheckcity.com and put in your figures.  Print the page.  Go to irs.gov and print out a copy of the W-4.  While there type in household employee and read it.

Give the W-4 to your employer...preferably BEFORE he gives you your first paycheck.

Then wait for the hemming and hawing.  Many employers of household help are CLUELESS that they have to a) do withholding and b) match the fica/mc.  Even the ones who get away without withholding all year won't forget to get the SSN of their Nanny (they plan to claim the child care credit!) and then issue a 1099-Misc for the full amount.

Even if you were babysitting at YOUR home, you wouldn't get to deduct car repairs or lunch.  These are personal expenses!