Category Archives: Payroll and Taxes

30 Blogs Parents Need for Payroll Advice

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Most nanny employers have heard about the “nanny tax” from friends and colleagues who’ve hired a nanny. Unfortunately the information is usually vague and doesn’t give employers any real help in understanding or dealing with their nanny taxes. Check out these sites for the information you need to get through the maze of nanny taxes.

What Is The Nanny Tax?

So what exactly is the nanny tax? It’s important to understand your responsibilities as a nanny employer and have a clear picture of the taxes you are required to pay by law.

Do You Owe Nanny Taxes?

Not all parents that employ a nanny have to pay the nanny tax. There are limitations that exclude some caregivers. Knowing the limitations before you hire your nanny will help you start off on the right foot from day one.

Misclassification of Workers

Is your nanny an employee or an independent contractor? This is one of the most common questions nanny employers have. The IRS is stepping up enforcement on misclassification of workers so it’s essential you’re clear about what role your nanny fills.

Understanding Nanny Rights  

All nannies have certain rights under the Fair Labor Standards Act, which is a federal law. Many nannies have additional rights under state laws. Take the time to understand what your nanny is entitled to so that you ensure you’re offering a legal wage and work environment.

The Paperwork Nanny Employers Need to Complete

No one likes doing paperwork, especially the tax kind. Unfortunately nanny employers have a fair amount of paperwork to keep up with when it comes to filing their nanny taxes properly. Remember there are forms that need to be filed with the federal government, your state, and possibly your local government too.

The Dangers of Not Paying the Nanny Tax

Thinking it’s all too complicated for you to bother with? There are many dangers that come with not paying your nanny taxes. With the recent rise in Domestic Workers Rights bills being introduced in several states, there’s more scrutiny on nanny employers by caregivers and government agencies.

Nanny taxes can be a hassle, but they’re a necessary part of being a nanny employer. Paying your taxes will not only help your nanny be more financially secure, it will keep you out of hot water with the IRS.

Household Employment Taxes 101

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We receive a LOT of questions from families about household employer taxes. Am I considered an employer? Am I required to pay taxes for my caregiver? How much are they?  All great questions.  The general answers are that people who pay a nanny or other caregiver to perform duties in or around their home ARE considered household employers and are required to pay taxes for their employee(s) if you pay that person $1,700 (2011) or more in a calendar year.  

The great news is that by taking advantage of tax breaks such as Dependent Care Accounts / Flexible Spending Accounts and Child and Dependent Tax Breaks, families can often offset or even exceed their nanny tax payments. That means that by paying taxes legally, families can often actually save money!

Here are some resources and information related to household employer taxes that help shed some light on the benefits and requirements of paying taxes for household employees.

Holiday Bonus for your Nanny or Household Employee

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We receive a lot of inquiries this time of year about holiday bonuses. The two most common questions we hear are: “What is the standard amount to give?” and “Is it taxable?”

To answer the first question, traditionally, holiday bonuses are between 1 to 2 weeks salary. If you can’t afford to provide 1-2 weeks salary, gifts such as a restaurant or spa gift card or a small token cash amount let your nanny know you appreciate her without breaking the bank. Additionally, since your relationship with your nanny is personal, the ultimate decision of what you give and how much you are comfortable giving is up to you.

For the second question, we turned to our friends at Breedlove & Associates, the industry leader in household employer taxes and payroll services. Breedlove advises that, “All bonuses and gifts are considered taxable compensation and by law must be handled like standard wages. Therefore, families should assume that their total cost of providing a bonus will be the bonus amount plus approximately 10%.  For example, a $500 bonus would result in a total employer cost of about $550.” If you have any further tax related questions on this topic, please feel free to contact Breedlove at 888-273-3356.

Do you give your nanny or household employeee a holiday bonus? Is it in addition to or in lieu of an actual gift? We’d love to hear your thoughts.

 

New York Domestic Workers’ Bill of Rights

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Today is a huge step and victory for nannies and other household employees in the State of New York. That’s because the Domestic Workers’ Bill of Rights in New York takes effect today, November 29, 2010. Per the New York Department of Labor, among other benefits, the new law will entitle nannies and other domestic employees with the following rights:

 

  • The right to overtime pay at time-and-a-half after 40 hours of work in a week, or 44 hours for workers who live in their employer’s home;
  • A day of rest (24 hours) every seven days, or overtime pay if they agree to work on that day;
  • Three paid days of rest each year after one year of work for the same employer; and
  • Protection under New York State Human Rights Law, and the creation of a special cause of action for domestic workers who suffer sexual or racial harassment.

For full details on the Domestic Workers’ Bill of Rights, please visit the website for the New York Dept. of Labor.

The State of New York is the first state to pass such a bill into law. Should other states follow in New York’s footsteps? What are your thoughts?

 

Nanny Taxes 101

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We receive a LOT of questions from families about household employer taxes. Am I considered an employer? Am I required to pay taxes for my caregiver? How much are they? These are all great questions! The general answers are that people who pay a nanny or other caregiver to perform duties in or around their home ARE considered household employers and are required to pay taxes for their employee(s) if you pay that person $1,700 (2010) or more in a calendar year.  

The great news is that by taking advantage of tax breaks such as Dependent Care Accounts/Flexible Spending Accounts and Child and Dependent Tax Breaks, families can often offset or even exceed their nanny tax payments. That means that by paying taxes legally, families can often actually save money!

Here are some resources and information related to household employer taxes that help shed some light on the benefits and requirements of paying taxes for household employees.

 

Should household employers be required to offer paid benefits, overtime, and 2 weeks notice/severence pay?

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Well, just last week, the New York State Senate passed a bill that would require such benefits as paid holidays, sick days, vacation days, overtime wages and either 14 days notice of termination or severance pay before families can fire their domestic employee. This bill is currently being “reconciled” against a similar bill passed last year and lawmakers expect New York Governor David Paterson to sign what is being proclaimed the nation’s first workplace protection for domestic employees. If signed, this new law is expected to affect an estimated 200,000 workers in New York, including illegal immigrants.

Is this bill long over due and should other states follow suit? What types of effects will this law have on a family’s ability to afford a nanny or domestic employee? Does your family already offer these benefits? Should workplace protection be extended to illegal immigrants? We’d love to hear thoughts from both families and nannies.

See “For Nannies, Hope for Workplace Protection” by Russ Buettner

New Hire Checklist – Don’t Miss a Step!

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You’ve found your ideal caregiver.  Now what???  Here’s an easy-to-follow hiring checklist so you can be sure not to miss a beat. 

 

  • Screening Done?    Be sure you’ve performed ALL our recommended screening steps.  These screening steps are the most important factors in making a successful hire!

  • Payroll & Taxes?    Inquire about payroll and taxes and find ways to save both time and money.  Services include tax filing, direct deposit, and more.

  • Required forms?    Be sure you and your new caregiver complete the required hiring forms, including the Employment Eligibility Verification (I-9) and the Form W-4.

  • Employment Agreement   GoNannies recommends having your new caregiver sign an Employment Agreement to minimize the potential for any misunderstandings now or in the future.

  • Training    Invest some time training.  While there’s much that an experienced caregiver will already know, there are always new aspects to any new position and the caregiver deserves some direction that will help them get started on the right foot.

  • Post-hire Screening    Don’t forget that screening should still take place AFTER the hire. Drop in unannounced, consider a mutually beneficial nanny-cam, communicate and evaluate regularly!  Call us to learn more.

Happy Hiring!