Dear Harry: I am taking a part-time, temporary job for the summer season. I'm going to hire a responsible high-school senior to look after my 3-year-old after her day care is finished. What do I have to do on my tax return in order not to get caught up in the nanny problem that got a lot of people in trouble?
What Harry says: If you pay her (him?) at least $1,700 during the year, you'll be required to file Schedule H with your 1040. This form will help you compute the Social Security and Medicare taxes that are due. Of course, if you anticipate that you will hit that $1,700, you should deduct the employee's share of the taxes and withhold them from each check. The rates for withholding are: 6.2 percent for SS and 1.45 percent for Medicare. Your share is the same. You may be exempt from all this if the youngster is under 18 at any time during 2010, and that's quite possible for a high-school senior.