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Nanny & 401k options
Old 05-16-2012, 09:40 PM   #1
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Nanny & 401k options

My neighbor hit me up with a question that I wasn't sure about, so I figured I would pose it here since it is more 401k based.

He's been interviewing new nannies for the summer. He normally treats them/pays them as a W-2 employee. He pays the employer taxes, FICA, etc. then he also deducts the employee taxes, etc., then nanny gets a net check for the balance.

He never thought about 401k for previous nannies until a potential nanny for this summer. She wants to put all her pay into a 401k until she hits 17k, then receives a paycheck.

Is this possible? Does he deposit it into he Vanguard individual 401k on her behalf and just pay employer taxes. Then after 17k, then nanny's gross wages gets hit for taxes, then nanny gets net pay?

I'm not sure about the process as we never had a nanny. Any suggestions?

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Old 05-16-2012, 11:05 PM   #2
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Solo 401k's are for self-employed people, not W-2 employees. If they could work it such that she is an independent contractor the nanny might be able to start one, but I don't think a nanny would typically qualify as self-employed.

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Old 05-17-2012, 04:40 AM   #3
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She could set up a business as a sole proprietor, set up a solo IRA and fund it herself.
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