It's tax season and time to remind nannies the benefits of being paid on-the-books. No one likes paying taxes, and certainly many nannies don't. In fact, it is estimated that 80% to 90% of household employers may not be paying taxes. Nannygate has become the popular term for employers who don't pay their household employee's taxes. Nannygate is an epidemic in America in part due to the fact that nannies don't insist their employer's are tax compliant because they don't realize the benefits of being paid-on-the-books.
Here are some of the benefits to being paid legally:History of Employment: Payment history helps to develop credit which is needed when applying for any type of loan including a credit card, car, mortgage, and rent.
Unemployment Benefits: Employees who lose their jobs, through no fault of their own, are able to receive a portion of their salary after a lay-off. This benefit is essential in a difficult economy.
Disability Benefits: If you have a non-work related illness or need to take maternity leave, you can collect Disability Insurance while you are unable to work.Workers Compensation: Workers Compensations covers employees who become sick or injured while working. It is an insurance plan to help pay for necessary medical care.
Social Security and Medicare: Full retirement benefits for Social Security and general medical coverage via Medicare are put into an account where you can collect once you meet a certain age requirement to retire. The extra money when you retire, or in addition to paying your medical expenses, will be a benefit.
References:
Breedlove and Associates
GTM Payroll Services
6 comments:
I have had to fight every year for a W2. Sometimes I would get a 1099 (which is a HUGE pain to deal with). I don't get why employers want to be illegal and not pay their nannies the right way.
It's against the law to do 1099.
I was referring to anonymous above
I didn't fight hard enough with my first three families, and thus ended up paying self-employment taxes (YIKES), which isn't right nor fair. When I got my degree and was interviewing again, I made sure to state in the interview that a nanny is a household employee, as defined by the IRS (bringing in a print out of the webpage which states this), and made sure that they understood what this meant. I lost a couple of families that I was interested in because they were unwilling to pay legally, but now I finally have a family that pays me on the books, and it feels great.
It's unfortunate, but we nannies really do have to fight for legal payment! People sometimes try to make it seem like it's just that nannies don't want to pay taxes... but, from my experience, most nannies want to be paid legally, it's just that families don't want to bother (though they still want the child care credit...).
Good points Sarah. I'd like to add that I know no one wants to pay taxes. Of course we'd like to have all our salary to spend anyway we like. But to be a mature adult you have to see the big picture.
You do not get the priviledges of being an American citizen if you don't pay taxes. You aren't protected like citizens, you are just an illegal alien.
You won't be able to get disability or workers comp if you get sick or hurt on the job. And if you get laid off you can't collect unemployment.
Dumb not to submit taxes as required by law.
Many households aren't aware that once they hire a nanny, or any other household worker, they're likely to be an employer just like a factory owner or a shopkeeper, and must handle employers' taxes on the wages they pay. Because it's a misunderstood area of tax law, it's easy to make potentially costly tax mistakes when you employ a nanny. Thanks a lot.
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