Our blog: It's good to know

When things change, we're on it. If it concerns household employment,
you'll find it here.

Minimum Wage Increasing in Several Cities and States in 2014

by Breedlove November 22, 2013

Many people think of minimum wage as the $7.25 per hour mandate set by the federal government. But in actuality, each state (and some municipalities) have the option of accepting the federal minimum wage or setting their own minimum wage. In areas where two minimum wage rates exist, the rule of thumb is you must pay your employee the higher of the two rates.


Every year, several states elect to change their minimum wage to account for things like inflation and cost of living. Starting January 1, 2014, if you are a household employer in the following states or cities, please make sure you are paying your employee at least the new minimum wage so you stay in compliance with state and city laws.



Arizona: $7.90 per hour

Connecticut: $8.70 per hour

Florida: $7.93 per hour

Missouri: $7.50 per hour

Montana: $7.90 per hour

New Jersey: $8.25 per hour

Ohio: $7.95 per hour

Oregon: $9.10 per hour

Vermont: $8.73 per hour

Washington: $9.32 per hour



San Francisco: $10.74 per hour

Albuquerque: $8.60 per hour

San Jose: $10.15 per hour


If you have any questions about minimum wage, overtime or other aspects of labor law, please visit the Answers page at www.breedlove.com or give us a call. We’re here to help!

In the World of Nanny Taxes, a 1099 is Never the Right Answer

by Breedlove November 20, 2013

The hiring process is the time to address nanny taxes. But many families are so focused on finding the perfect caregiver that they overlook the employer tax requirements and unnecessarily expose themselves to financial and legal risk.


This edition of The Legal Review highlights this scenario as the Johnson family runs into tax trouble when their occasional babysitter, Brooke, begins to work for them as a full-time nanny. She couldn’t be more excited to have her first full-time job, but it didn’t occur to her or the Johnsons that there would now be legal responsibilities involved with her employment. 


The Mistake:

Brooke began her work as a full-time nanny with the Johnsons in the summer of 2012. Since she recently graduated from college, Brooke was thrilled to have a steady income and had no issue continuing the type of employment agreement she already had with the Johnsons. The family paid Brooke in cash at the same hourly rate they agreed on when Brooke began babysitting and their arrangement appeared to be progressing smoothly.


Until January. Brooke’s father, an accountant, began pestering her about filing taxes. He told her that she was an employee now and her income needed to be reported to the IRS. Brooke approached the Johnsons for guidance, and eager to help, they produced a 1099 for her listing her wages for the year.


The Law:

If a family pays a nanny, senior caregiver or other household employee $1,800 (2013) or more in a calendar year (in 2014, the threshold will increase to $1,900), they are required to withhold Social Security and Medicare (FICA) taxes from the employee’s wages and pay a matching portion of FICA taxes on top of their employee’s gross earnings. They are also required to pay federal and state unemployment insurance taxes if the employee earned more than $1,000 in a calendar quarter.


Note: Other employer taxes may apply depending on the employer’s residence state. Visit your state’s tax page for more details.


Additionally, nannies are classified as employees in the eyes of the IRS, not independent contractors. In order to legally report their wages and the taxes withheld, their employer must provide them with an accurate W-2 by January 31. Families who misclassify their nanny as an independent contractor by providing them a Form 1099 can be subject to tax evasion charges by the IRS. Recently, the U.S. Department of Labor released its budget details, including a new line item for $10 million in state grants to enhance enforcement of worker classification laws.


The Mess:

Brooke obtained the 1099 from the Johnson family and brought it to her father so he could assist her in filing her taxes. Her father immediately realized this was incorrect and instructed Brooke to have the Johnsons provide her a W-2.


Afraid she would end up in legal trouble with the IRS, Brooke came to the family in a panic explaining the difficulty she was having filing her taxes. The Johnsons were embarrassed and unaware of what to do since they paid Brooke in cash and obviously never withheld FICA taxes for the entire time she worked for them in 2012. They were also concerned for their personal tax liability because they never paid the matching employer portion of FICA taxes.


The Outcome:

Brooke asked her father if he could help her and Johnsons remedy their tax situation. But because household employment taxes were not something his accounting office handled, he advised the Johnsons to call Breedlove & Associates.


Mrs. Johnson called the next day and spoke to a Breedlove consultant who informed her that we could go back to the previous year and file the appropriate tax returns to ensure they were compliant with the law. When the consultant explained that a W-2 could be prepared for Brooke in only a few days, the Johnsons signed up immediately. The family informed Breedlove & Associates of all the wages they paid to Brooke and agreed to cover the taxes that should have been withheld.


Breedlove & Associates was then able to retroactively file all of the Johnson’s state tax returns for the 2012 tax year and process the year-end documents – including Brooke’s W-2 – which listed the correct amounts of Social Security and Medicare taxes. Brooke was finally able to file her taxes. To top things off, Breedlove & Associates was even able to get the state to waive the penalties they assessed on the Johnsons for filing their taxes late.


How the Whole Thing Could Have Been Avoided:

If the Johnsons had only been aware that hiring a nanny full-time entailed new responsibilities as an employer, the whole mess could have been avoided. Breedlove & Associates works to educate and keep families compliant with the law. By withholding taxes the whole year, making appropriate tax payments and filing correct returns, Breedlove & Associates ensures that every employer is acting within the law and is never stuck in a bind like the one the Johnsons found themselves in. The Johnsons are grateful that Breedlove & Associates now handles Brooke’s W-2 and everything else related to her pay and their taxes!

FICA Threshold Increasing for 2014

by Breedlove November 13, 2013

Recently, the Social Security Administration announced that the Social Security & Medicare (FICA) tax threshold for 2014 will increase from $1,800 to $1,900 in gross wages and cap at $117,000. For families with full-time household employees, this change should not affect their situation because these employees will earn well over the new threshold.

However, for families that use temporary employees on and off throughout the year, this increase gives an extra $100 leeway before the tax withholding and remittance requirements kick in. Please keep in mind that, even though you may not have to withhold FICA from your temporary employee, you may still be required to file unemployment tax returns if the total paid to all employees exceeds $1,000 in a calendar quarter (a few states have thresholds that are even lower).

Whether you have to worry about FICA or not, remember you are still legally an employer and must follow all local, state and federal labor laws. For the specific requirements in your area, please visit or state-specific pages or give us a call. We’re here to help!

Nanny Tax Tip: Take Advantage of Your FSA Open Enrollment Period

by Breedlove October 17, 2013

If you have a nanny or other childcare provider currently working in your home – or are planning to hire in 2014, now is the time to check with your company’s human resources department about enrolling in a Dependent Care Account (a.k.a. Flexible Spending Account or FSA) next year. If you or your spouse has access to this benefit, you’ll be able to pay for up to $5,000 of your childcare expenses with pre-tax dollars. Depending on your marginal tax rate, this will save you between $2,000 and $2,300 next year.

Most companies have open enrollment for their FSA program in the fall and, if you miss it, you’ll have to wait another 12 months unless you have a “life-changing event” such as the birth of another child.

If you miss the enrollment period, you can still take advantage of the Tax Credit for Child or Dependent Care. While the savings are much less than an FSA ($600 if you have one child or $1,200 if you have two or more children), it’s still worth taking advantage of.

For more information on dependent care tax breaks, visit our Answers section or give us a call.

How the California Domestic Worker Bill of Rights Affects Families

by Breedlove October 7, 2013

Recently, California Governor Jerry Brown signed AB 241, the Domestic Worker Bill of Rights, into law effective January 1, 2014. Originally the bill included provisions for overtime, off-duty meal breaks and a 30-day notice of termination.

The off-duty meal breaks and 30-day termination notices were struck from the final bill. However, the new law stipulates that all domestic employees in California will be entitled to overtime.

The specific overtime requirements will vary depending on the type of worker. For most families, the following overtime stipulations will apply to their employment situation.

Personal Attendants (nannies, baby nurses, senior caregivers, etc.)

·         Live-Out – Overtime is required if the employee works more than 9 hours in a day and/or 40* in a 7-day workweek.

·         Live-In – Overtime is required if the employee works more than 9 hours in a day and/or 45 hours in a 7-day workweek.

* Federal law governed by the Fair Labor Standards Act (FLSA) entitles all live-out domestic workers to overtime rates for all hours worked over 40 in a workweek. Therefore, the weekly overtime threshold of 45 hours mandated in AB 241 is only applicable to live-in personal attendants.

All Other Domestic Workers (housekeepers, personal assistants, chefs, estate managers, etc.)

·         Live-Out – Overtime must be paid to the employee if they work more than 8 hours in a day and/or 40 in a 7-day workweek.

·         Live-In – Overtime is required if the employee works more than 9 hours in a day.

NOTE: There are additional overtime requirements for employees that work 12 or more hours in a day or 6 or 7 consecutive days in a workweek. Please call our office for details if this employment situation arises for you.

Financial Illustrations of the Cost Impact to Employers

Not all families with overtime situations will be impacted by these changes. If a family employs a nanny 5 days per week and she works 10 hours per day, her payroll will not change:

2013 Wages                                      2014 Wages
Hourly Rate = $16/hr                      Hourly Rate = $16/hr
Regular Hours Worked = 40          Regular Hours Worked = 40
Overtime Hours Worked = 10       Daily Overtime Hours = 5
                                                           Additional Overtime Hours = 5

Total = $880                                     Total = $880
(40 X $16) + (10 X $24)                   (40 X $16) + (5 X $24) + (5 X $24)

However, if the same family employs a nanny 3 days per week and she works 11 hours per day, her payroll will be affected by the 2 additional hours of daily overtime each day she works:

2013 Wages                                     2014 Wages
Hourly Rate = $16/hr                     Hourly Rate = $16/hr
Regular Hours Worked = 33         Regular Hours Worked = 27
Overtime Hours Worked = 0        Daily Overtime Hours = 6

Total = $528                                    Total = $576
(33 X $16)                                        (27 X $16) + (6 X $24)

As you can see from the above illustrations, these changes may not affect many families. However, if you need any assistance with this new overtime legislation, please give our office a call. We're here to help! 

A Toast to Nanny Appreciation Week

by Breedlove September 27, 2013

This weekend draws a close to Nanny Appreciation Week – a time to show the hard-working, unsung heroes of our society how much we appreciate the effort they put into caring for our children. We hope you’ve shown your caregiver how much you appreciate the way she cares, instructs, teaches, nurtures, inspires and protects your loved ones.

We also want to thank all the families that give the gift of professional pay to their nanny year-round. It is one of the best things you can do for her because she has all the protections and benefits that other professionals enjoy (retirement income and insurance through Social Security and Medicare, unemployment benefits, etc.).

Questions and Answers about the Affordable Care Act for Household Employers

by Breedlove September 17, 2013

Beginning October 1, the first stages of the Affordable Care Act will go live. Americans looking for health insurance will have access to an online health insurance exchange where they can compare policies and ultimately purchase a plan that suits their individual needs. Because this is a new change to the way health insurance is administered, many families are confused or concerned about how the changes will impact them as a household employer.

To help these families feel more comfortable moving forward, we’ve created the following Frequently Asked Questions for household employers:

What is the Affordable Care Act?

The Patient Protection and Affordable Care Act, commonly referred to as the Affordable Care Act, is a federal statute which was signed into law in 2010. The statute is primarily aimed at reducing the overall cost of health care and decreasing the number of uninsured individuals living in the United States by enacting a number of different mandates, subsidies and tax credits.

Am I required to offer health insurance to my employee(s)?

No, employers are not required to offer health insurance if they employ fewer than 50 employees. However, you are required to provide your current employee(s) and, at the time of hire, any future employee(s) with notice of the new Health Insurance Marketplace.

Is my employee required to have health insurance?

Yes, beginning in 2014, your employee may be charged penalties if she does not have health insurance coverage. However, you are not responsible for making sure your employee has health insurance.

What is the Health Insurance Marketplace?

The Health Insurance Marketplace, or The Marketplace, is a “one-stop shop” where individuals can compare and purchase health insurance policies. Open enrollment for The Marketplace begins on October 1, 2013 for coverage beginning January 1, 2014. Your employee(s) will be able to purchase health insurance through The Marketplace until open enrollment ends on March 31, 2014. For more information on The Marketplace, or to complete an online application for health insurance coverage, please visit www.HealthCare.gov.

How much will health insurance cost?

The cost of health insurance will vary depending on your state and the amount of coverage your employee chooses. After completing an application through The Marketplace, your employee will be able to compare prices and coverage options for   different health insurance policies. Depending on your employee’s income and family size, she may be eligible for the Advance Premium Tax Credit if she purchases insurance through The Marketplace. The credit can be applied directly to her monthly premiums which results in immediate cost savings. If she qualifies for the Advance Premium Tax Credit, her savings will be reflected in the prices displayed on The Marketplace.

If I contribute to my employee’s health insurance policy, will I be eligible for any tax breaks?

If you set up a health insurance policy for your employee through SHOP (Small Business Health Options Program) on the Marketplace and pay at least 50% of your employee’s premiums, you may be able to take advantage of the Credit for Small Employer Health Insurance. To take this credit, you’ll attach Form 8941 to your personal income tax return. Beginning in 2014, the credit will increase to up to 50% of the contribution you pay. For more information regarding the requirements for contributing to health insurance, please contact our office.

Changes to Healthcare Law May Benefit Families

by Breedlove August 20, 2013

A new era of health insurance is set to begin on January 1, 2014. The Patient Protection & Affordable Care Act (also known as "ObamaCare") will usher in dramatic changes to coverage requirements and policy procurement. This month, The Legal Review takes on a different look as we demystify our new universal healthcare system and examine its effect on household employment.
Coverage Requirements
Next year, every U.S. citizen will be required to have health insurance coverage - either their own policy or through a spouse, parent or group plan. The consequences for not having coverage will be a fine, which will become increasingly punitive over the next few years. Unfortunately, many household employees currently don't have health insurance - due to expense, difficulty obtaining coverage or simply a lack of perceived need.
Beginning October 1, 2013, each state will provide access to an online health insurance exchange, which will provide a marketplace where individuals can compare health insurance plans and purchase a policy that suits their needs. Links to the exchange in each state can be found on our state-specific web pages.
How Employers Can Help AND Save Money
While household employees will be required to have health insurance coverage, household employers are NOT required to offer or pay for the coverage. However, Congress has created incentives for employers to make health insurance contributions part of the compensation package.
First, the employer contribution is considered non-taxable, so neither the employer nor the employee is required to pay any taxes on that portion of the compensation.
Second, families are eligible for a health insurance tax credit (HITC) - as long as they pay for at least half of their employee's health insurance premium and the annual wages they pay to the employee (or average annual wages if they have more than one employee) is less than $50,000. Currently, the HITC provides a tax credit of up to 35% of the employer's health insurance contributions. However, this credit will increase to a maximum of 50% starting in 2014.
The combination of non-taxability and tax credit make employer-paid health insurance a very attractive benefit option for most families. Take a look at the following example to see how a nanny's income and a family's cost can be affected by the family covering the full cost of a health insurance policy at $300 per month (or $3,600 annually):



As you can see, the nanny takes home more money and the family saves money. It's a win-win for both family and caregiver.
How Families Can Pay for Insurance and Receive the Credit
Generally, a household employer is not able to set up a group health insurance policy to offer their employee. Instead, the employee should find and purchase an individual policy of their choosing. The family may pay up to the entire monthly premium for their employee and should make payments directly to the health insurance company in order to keep accurate records of their contributions. At tax time, the family will file Form 8941 with their personal income tax return to claim the tax credit for their health insurance contributions.
What if the Employee Purchases Insurance on Their Own?
If a family does not wish to contribute to their employee's health insurance premiums or the employee wishes to purchase coverage on their own, they can still be eligible for a subsidy to offset the financial burden if they purchase a policy through their state's exchange. The amount of the subsidy is based on the employee's income level and will usually be credited to them at tax time. (In certain circumstances the employee may be able to receive their subsidy earlier)
How We Can Help
At Breedlove & Associates, we're always happy to help our clients understand the tax benefits of including health insurance in the compensation package and how to handle the payroll logistics. Saving families and caregivers money is our favorite part of the business!

Back-to-School Tip: NannyShare Arrangements Make Childcare More Affordable

by breedlove August 15, 2013

We talk to a lot of families who express a desire to upgrade their childcare situation from a daycare to a nanny.  They cite flexibility of hours, quality & consistency of caregivers, exposure to illnesses and convenience as the primary reasons to make the transition.

With 2 young children, the cost of a nanny can be reasonably close to the cost of daycare – so the decision is pretty easy.  With 1 child, a nanny is quite a bit more expensive, making it difficult for many families to make it work financially.

For this reason, NannyShares have become very popular.  By splitting the cost of a nanny, more and more families are finding that high-quality in-home care is within reach. 

But, to make it work, both families need to work together to build consensus on a wide variety of issues, including diet, activities, schedule, discipline, communication, compensation and more. 

From a legal perspective, it’s important to know that each family in a NannyShare is considered an employer and, therefore, each needs to handle the “nanny tax” obligations separately.  The good news is that each family gets to take advantage of the childcare tax breaks, which typically more than offset the employer tax costs in NannyShare situations (visit our free nanny tax calculator for an estimate of your employer taxes and tax breaks).

The bottom line is that NannyShares can be a great solution for hard-working families trying to get the quality of a nanny at a price that is comparable to daycare.

Nanny Hiring Tip: Capitalizing on Tax Breaks

by Breedlove August 14, 2013

When families start the nanny hiring process, there are lots of questions about the cost.  Are there tax breaks available?  Which one should I use?  Are there income restrictions?  How much should I budget?


Here’s what you need to know. 


All families who pay their employee legally are entitled to at least one tax break, regardless of their income level.  The only restrictions are that the children under care must be under age 13 and both parents must pass the “work-related test,” meaning each is employed, looking for employment or a full-time student.


For many families, the tax savings offset most of the employer tax cost.  For some, the savings can even exceed the cost of their employer taxes (yes, it’s possible to come out ahead financially).


Here are the two childcare tax breaks: 


1) Dependent Care Flexible Spending Account (FSA). Many companies offer their employees the option to contribute up to $5,000 of their pre-tax earnings every year to an FSA. Because paying nanny taxes qualifies as a childcare expense, you can take advantage of paying these expenses tax-free. Depending on your marginal tax rate, this tax break can save as much as $2,300 per year.  If you think your company offers an FSA program, we recommend that you talk to the benefits manager about enrollment.  Open enrollment usually occurs in the fall for the subsequent tax year, but there are exceptions for life-changing events such as the birth of a child that may allow you to enroll in this tax year.


2) Child and Dependent Care Tax Credit. Household employers are entitled to a 20% tax credit on childcare expenses of up to $3,000 for one dependent ($600 savings) or up to $6,000 for two or more dependents ($1,200 savings). You can claim this tax credit by completing IRS Form 2441 as part of your personal income tax return at year-end.



If you only have one dependent under age 13, you’ll have to choose between the two tax breaks.  For most families the FSA is the best option. 


If you have two or more dependents under age 13, you can take advantage of both tax breaks if your childcare expenses were greater than your FSA contribution. Excess expenses (up to the $6,000 expense limit) may be applied to the Child and Dependent Care Tax Credit on Form 2441.


To calculate your employer budget, visit our free Nanny Tax Calculator.  With these significant breaks, most families find that paying a nanny legally is not only the right thing to do, it’s also the wise thing to do.

We are proud to be the household payroll expert for Care.com, the world's largest online destination for care.