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Frequently Asked Questions
Q. What can Nest Payroll do for me?
A. If you have a household employee--like a nanny, caregiver or a housekeeper--whom you pay more than $2,100 per year, then Nest Payroll was built for you.
Nest Payroll is an easy to use mobile app that provides peace of mind by keeping you legal when you pay your home employees. You avoid fines and tax penalties, and become potentially eligible for dependent care tax breaks.
Paying legally also maintains a professional relationship with your employee, who receives peace of mind knowing there’s a safety net such as unemployment benefits and accumulating Social Security and Medicare credits. Legitimate income enables your employee to apply for car, school or home loans, open a bank account or be able to rent a place to live.
In addition, using Nest Payroll will save you over 60 hours during the year. That’s actually the average time the IRS calculates it would take you to do it yourself. Having done it ourselves, we know it actually takes longer!
Nest Payroll is easy to setup and use, which enables you to create your first paycheck in minutes. Once your profile, authorization and subscription are completed, Nest Payroll handles the new hire reports, state and federal employer tax IDs, paystubs, quarterly payroll tax filings, and provides all the year-end requirements including W2s and a completed Schedule H for your tax return.
Q. How much does Nest Payroll cost?
A. Simply $34/month without any hidden fees. We don’t charge for the number of times you pay (so pay anytime your employee needs to get paid), additional employees, set-up, year-end, or other fees. We save you hundreds over comparable services!
Q: What’s included in the subscription?
A. Everything you need:
Instant paycheck calculations: Pay your household employee in minutes, the right way.
Instant pay stubs that you can text, email or print for your employee.
Flexible, immediate and secure payments to your employees from the app using your favorite payment or banking app. Paper checks work too.
Registration for Federal and State Employer Identification Numbers (EINs) on your behalf.
New Employee reports filed with your state on your behalf.
Quarterly state payroll tax filings on your behalf. Payments are deducted from your bank account directly by the state tax authority. We don’t touch your funds.
Quarterly Federal 1040ES filings. Payments are deducted from your bank account directly by the IRS. We don’t touch your funds.
W2s for your employees at year-end.
W2/W3s filed at year-end.
A signature-ready Schedule H for April tax time.
Year-to-date tax reports at your fingertips. Share easily with your Accountant!
Customizable reminders to pay your employees.
Guidance: Stay on top of tax changes and get answers on critical topics like the child care tax credit, dependant care flexible spending accounts, and more.
Fast and convenient support: Contact us from within the app anytime via text, call or email.
As your Payroll Service Provider (PSP) and Reporting Agent (RAF), we handle and monitor the employer related paperwork with your state and the IRS. We’ll let you know if anything needs your attention.
Q. How do I get started?
A. Please download the Nest Payroll app from the App Store onto your iPhone. After subscribing from within the app, you can generate a paycheck amount quickly after entering basic information about your employee and yourself. To generate a legal paystub (meeting IRS requirements), you will need to complete your profile, which includes authorizing us to obtain Federal and State Tax ID’s on your behalf.
Q. What states are covered?
A. Currently California and Texas. We are working on adding more states! Please send us a message through the app or email us at firstname.lastname@example.org if you live in a different state and would like to use our service.
Q. Do you help me register and get my EIN with the government entities?
A. Yes, we’ll get you registered as a household employer with the IRS and your state, obtaining your federal and state employer identification numbers. You will be asked in your employer profile to authorize us to do so. If you already are registered as a household employer, please email the account numbers to us at email@example.com.
Q. Why do you need my social security number and bank account?
When you onboard with Nest Payroll, we need some sensitive data from you.
Your data enables us to:
Obtain your household Employer Identification Number (EIN) from the IRS.
Obtain your state employer tax account number.
File and facilitate payment of your payroll taxes with the IRS, the Social Security Administration and your state employer tax authority.
Produce your Schedule H for your federal return.
Produce a legal paystub for your employees
Produce completed employee W2s.
Submit your employer W3 to the Social Security Administration.
Q. How secure is my data?
A. We take security very seriously, and follow best industry practices. We also ask for the minimum amount of information that enables us to process your household payroll.
Our architecture has been built from the ground up with your data security in mind:
We recommend you use Apple’s Password AutoFill feature at account creation. With a simple tap, you can create and save new passwords. Passwords generated by iOS, by default, are twenty characters long. They contain one digit, one uppercase character, two hyphens, and sixteen lowercase characters. These generated passwords are strong, containing seventy-one bits of entropy.
Access to your data is protected with your account credentials. Please ensure you’re using a safe and unique password to protect your data.
All credentials and passwords are stored on your iOS device’s Keychain.
Server-side data at rest encryption: All data stored on our servers are thoroughly encrypted with asymmetric encryption and backed by an industry standard Key Management System that ensures rotating encryption keys and minimizes vectors of attack.
Client-side data at rest encryption: In order to make the app responsive and easy to use, we sometimes require the download of some of your personal information from our secure servers. We ensure that any local copy of that information is encrypted in transit as well as locally with server grade encryption.
Data in transit encryption: All communication with our servers use industry standard HTTPS TLS 2.0 to ensure data in transit is always secure.
Q. Do you file the state-required New Hire Report for me?
A. Yes, we will take care of this for you. We prepare the report on your behalf for each employee you hire and file it with the state before the deadline.
Q. Do you withhold income taxes?
A. Yes, and you can make the proper election for your employee in his or her settings under My Team, based on your employee’s W4 election. If you did not withhold, your employee could have an unplanned tax burden at the end of the year, so we take care of this automatically.
Q. Do you provide a W2 at the end of the year?
A. Yes, we prepare your employee's W2 and distribute it to you for them in January. We will also file the required W2/W3 reports with the Social Security Administration, so you don’t have to do anything.
Q. When do I need to start paying a household employee legally?
A. Generally, if you plan to pay a household worker more than $2,100 (2019), then you are required to pay Federal payroll taxes including social security and medicare. However, state requirements differ from Federal. For example, California requires you to withhold State Disability Insurance (SDI) once you pay $750 in a quarter, and after $1,000 you need to withhold SDI and pay Unemployment Insurance (UI) and Employment Training Tax (ETT) for the remainder of the current year and through the following year, even if wages fall below $1,000 in a quarter.
Q. Who is considered a household employee?
A. You have a household employee if you hired someone to do household work or take care of your children or dependents, and you control not only what work is done but also how it is done. For example, in the case of a nanny, the parents control the schedule, specify the food that the nanny feeds to the children and direct what activities the children undertake. The same criteria apply to caregivers, private nurses, house cleaners, housekeepers, gardeners, estate managers and personal chefs.
It doesn't matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job. The employee may have other employers, as would be the case of a nanny share.
Ask yourself who has control: the employee or you, the employer? If the worker has an independent business (sole proprietorship, LLC, etc.), controls how the job is done (you don’t give them feedback on how to do it), provides his or her own tools, you make the payment to a business name, then he or she is probably not your employee. See IRS guidelines here.
Q. How do I report taxes if I share my employee with another family?
A. If you share an employee with another family, both families are separate employers. Each family is responsible for withholding and paying payroll taxes on their share of the wages paid to the employee.
Q. How do I get a tax break on childcare or dependent care?
A. There are a couple ways to claim a tax break for care for a dependent:
1. Flexible Spending Accounts (FSA) or Dependent Care Assistance Program (DCAP) – Many companies provide this as a benefit to their employees and allow contributions up to $5000 of pre-tax earnings to a Dependent Care account. Employees would then be reimbursed these tax-free funds to cover child/dependent care expenses. The care must be for a child under age 13 or a disabled dependent meeting certain other requirements.
2. Child and Dependent Care Tax Credit – For folks who don’t have access to a Dependent Care Account through work, you can claim the Child and Dependent Care Tax Credit (Form 2441) on your personal income tax return at tax time. You can claim up to $3,000 of the un-reimbursed qualifying child care expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. The credit can be anywhere from 20% to 35% of your qualifying expenses.
If you have more than one qualifying dependent (2+ children or a child plus your dependent parent, for ex) and qualifying expenses in excess of $5,000, it may be possible to be reimbursed the maximum amount of $5,000 through the FSA and take a Dependent Care Tax Credit based on excess expenses up to an additional $1,000.
Please refer to the IRS details here: https://www.irs.gov/pub/irs-pdf/p503.pdf
Please speak to your tax advisor on the best way to handle your specific situation.
Q. What if I have a question?
A. We would love to help you, so please get in touch. You can text/call or email us right from the app under Help & Support. We'll be happy to answer your questions and get back to you in a timely manner.
Q. What if I already use a payroll service, but I would like to switch?
A. We can handle this. If you cancel your existing service provider, we can “white-glove” migrate your data. We’ll need the paystubs and any quarterly reports from this current year. Please text us at 650-460-1750 or email us at firstname.lastname@example.org and let us know you’d like to migrate your data. We’ll make it simple for you.
Q. I need to pay a lot of back taxes and fix some payroll problems that I did incorrectly. Can you fix them for me?
A. Give us a call or text us, and we’ll see what we can do. Text/Call 650-460-1750 or email us at email@example.com
Q. My employee will be gone for several weeks. What do I do with payroll?
A. Even if there’s no payroll to report, quarterly filings are still required which Nest Payroll will submit on your behalf. Your subscription will need to continue normally, and you don’t have to do anything until you need to make the next paycheck when your employee returns.
Q. My employee quit. What do I do about canceling payroll?
A. Please Text/Call 650-460-1750 or email us at firstname.lastname@example.org and let us know. You will be contacted by our support team at the phone number provided in your Employer Profile within one business day. We need to get in touch with you to ensure we handle all outstanding tax payments and filings correctly. You might need your employee's W2 and your Schedule H. If you plan to employ people to work in your home in the future, but do not have payroll this quarter, we will file for you as temporarily no wages to report. If you completely stop employing people to work in your home and do not intend to hire anyone in the future, you will need to have your California account closed. We’ll have a chat to help you do it right.
Q. Can I deduct the service costs of Nest Payroll?
A. Yes. You will need to:
1. Itemize your deductions; and
2. The sum of your miscellaneous expenses (which also includes things like unreimbursed employee-related expenses, investment expenses, and safe deposit box fees) must exceed 2% of your Adjusted Gross Income (AGI).
You are only allowed to deduct the miscellaneous expenses above and beyond 2% of your AGI – not the full amount. Please speak to your tax advisor on the best way to handle your specific situation.
Q. Why do I need to authorize power of attorney to Nest Payroll?
A. Federal and state law requires all payroll providers to obtain this authorization, which allows providers to:
obtain your federal EIN
electronically report, file, and enable payment of a household employer's taxes with the appropriate state agencies.
request and inspect a household employer’s confidential tax information, e.g., the proper state tax rates.
report new hires to the appropriate state labor departments.
Power of attorney does not authorize payroll providers to make legal decisions for the household employer.
Q. I already have an EIN and a CA state EDD number. Can I use those?
A. If your Federal EIN is for either a sole proprietor or a household employer, then Nest Payroll needs this same number. Please text/call us at (650)460-1750 or email us at email@example.com.
If the Federal EIN is for a corporation, LLC, partnership, etc., then do NOT use that EIN. You will need a different EIN as a household employer. We will handle this for you.
Q. I already have a CA state EDD number. Can I use it?
Yes, if your California EDD number was set-up as a household employer. However, if it was for a commercial business or sole proprietor business, you’ll need to have a separate account number just for household.
Please text/call us at (650)460-1750 or email us at firstname.lastname@example.org.
Q. What if I hire an employee but they earn less than $2,100 in wages?
A. If you have paid your household employee(s) less than the wage base, which is $2,100 for tax year 2018, all withheld federal taxes must be refunded to the employee and all wages removed from your W-2 forms before filing. State taxes could still apply. Please text/call us at (650)460-1750 or email us at email@example.com.