Meus mio asked:
I pay my nanny every two weeks. Her next pay period will be the last week of December and the first week of January. Am I supposed to split that pay period in half and include the December half in this year’s taxes? Or, even though she worked the hours in 2007, does the fact that she does not get paid for those hours until 2008 mean that the whole pay period belongs with that year’s taxes?
I pay my nanny every two weeks. Her next pay period will be the last week of December and the first week of January. Am I supposed to split that pay period in half and include the December half in this year’s taxes? Or, even though she worked the hours in 2007, does the fact that she does not get paid for those hours until 2008 mean that the whole pay period belongs with that year’s taxes?
10 comments
Comment by norwic_fruit on July 23, 2009 at 8:01 pm
It’s based on when the pay period ends , not when you put the check/cash in her hands.
Comment by heart o' gold on July 26, 2009 at 3:54 am
Yes, the pay she actually receives in 2008 goes into that years taxes.
Comment by snoopy on July 28, 2009 at 5:51 am
It depends on your accounting method. Take a look at this:
…and see if that helps. You’ll have to figure it out for yourself because only you know how you are handling other things; please read this material and google accounting methods for more info if you need. Anyone telling you exactly what to do on here is giving you directions without having all of the information needed, so just ignore those posts. Please. As you can see already, people are telling you one way or the other and not even TELLING you that there are two different acceptable methods (with pros and cons to both.) I **** it when people talk with authority about things they know little about.
Good luck.
Comment by the_shepherd's_child on July 31, 2009 at 5:41 pm
most businesses that pay every two weeks just continue on as usual. the income 2007-2008 pay will be taxed as 2008 income. just do the same.
Comment by qris on August 3, 2009 at 7:34 pm
Although some people may argue one or the other technically the year begins and ends in a full pay period. So if she gets paid bi weekly check to see when her pay period would have started within this fiscal year. If it would have started in the previous year then her last pay period for the year . Take 26 pay periods back and that is your year. if it would have started after the year then finish up this current pay period. From what i understand, there is not an exact time line for this and companies sometimes shift pay periods to play with year end and quarterlies, so if they don’t get in trouble, I doubt you will if it’s not exact.
Comment by Gem on August 4, 2009 at 8:52 pm
If you run a business and are on the accrual method it would matter for your income taxes, but not for your payroll taxes.
Pay her as usual, if the paydate falls in 2008 then ALL the income would be reported in 2008.
When it come to payroll taxes and W-2s the only thing that matters is the day the employee gets the check, not when it is earned.
Comment by v b on August 5, 2009 at 6:07 pm
If you pay her every two weeks, keep doing it that way–any pay she RECEIVES in 2008 goes on the 2008 W-2.
Comment by wartz on August 6, 2009 at 4:24 pm
The only thing that is important is when the employee receives the money. That will be in 2008.
Comment by Judy on August 8, 2009 at 9:38 am
No, you don’t split it. The paycheck applies to the year when the check is written, not necessarily when the work was done. So that paycheck would belong with 2008 for tax purposes.
Comment by bostonianinmo on August 8, 2009 at 7:59 pm
There are actually 2 considerations here, and they can be different.
If you are on the accural method, you take the expense when you incur the debt, not when it’s paid. If you are on the cash method you take it when you pay it regardless of when it’s paid.
Since most individuals are on the cash method — and since a nanny isn’t a business expense — you take the expense for wages actually paid in 2008 (I’m assuming for the Child Dependent Care Credit) and she claims the income in the year that it’s actually received which would also be 2008 in this case.