September 20, 2012
Next week is the official appreciation week for the unsung heroes of our society -- nannies. If you have a caregiver, make sure she knows how much you appreciate the way she nurtures, teaches, inspires, and protects your loved ones. It doesn't have to be something lavish or expensive -- just make sure she feels the love!
Beyond Nanny Appeciation Week, one of the best things a family can do for their nanny is to make sure she is paid professionally -- so that she has all the protections and benefits that other professionals enjoy (i.e. retirement income through Social Security, retirement medical insurance through Medicare, unemployment benefits, etc.). Handling payroll correctly is not as expensive or as difficult as many people think and goes a long way toward creating a successful employment relationship.
September 11, 2012
Since we became household employers and started Breedlove & Associates back in 1992, the question of worker classification has come up almost every single day in one form or another -- Is she my employee or an independent contractor? Can't I just give her a Form 1099 at year end? If she agrees to be an independent contractor, is it legal?
Unfortunately, a lot of the answers floating around on parent forums and other websites are flat out wrong -- and lead families into expensive mistakes. We feel like it's our job to share the correct information so families don't get blindsided by legal problems. So, here's what you need to know.
The IRS has a 20-point test to determine worker classification. In virtually all cases, the IRS has ruled that domestic workers (i.e. nannies, housekeepers, senior caregivers, personal assistants, chefs, estate managers, etc.) are employees of the families for whom they work. It doesn't matter what the contract says or what the worker calls herself, the family is legally considered the employer and, therefore, they are subject to household labor laws and the "nanny tax" obligations.
Why does the IRS care? It's all about tax dollars and funding the programs that provide worker benefits and protections. Employers are required to match the employee's Social Security and Medicare taxes as well as pitch in to the state and federal unemployment pools that fund unemployment benefits. Without these contributions, workers find themselves without retirement income, health insurance during retirement or temporary income in the event of a layoff.
For these reasons, the IRS and the Department of Labor have teamed up recently to begin an unprecedented effort to crack down on worker misclassification. It's simply not worth the tax evasion charges -- and corresponding fines, back taxes and interest.
If you have any questions about worker classsification, please don't hesitate to give us a call. We're here to help.
July 17, 2012
If you pay a domestic worker (i.e. nanny, housekeeper, senior caregiver, etc.) $1,800 or more in a calendar year, you are required to withhold Social Security and Medicare taxes (currently 4.2% and 1.45%, respectively) from your employee's pay. Collectively, these taxes are known as "FICA." Employers who fail to withhold the FICA taxes are responsible for paying them for their employee.
For more information about the "nanny tax" withholding requirements, visit our Expert Advice page.
November 3, 2011
In 2011, if a family employs a household worker and pays him/her less than $1,700 in the calendar year, the family is not obligated to withhold FICA taxes (Social Security and Medicare) nor are they required to pay the employer portion of FICA for that individual. It's generally referred to as the "Casual Babysitting Exemption."
In 2012, the threshold will increase to $1,800 in a calendar year.
Please keep in mind that, even though you may be exempt from FICA reporting, you may still be required to file unemployment tax returns if the total paid to all employees combined exceeds $1,000 in a calendar quarter (a few states have thresholds that are even lower).
Finally, whether you have to file or not, you are legally still an employer so make sure you adhere to all local, state and federal labor laws.