Do Parents Benefit by Paying Nannies On-The-Books?

Yesterday we listed some of the benefits for nannies that are paid legally (AKA on-the-books).

Now that you know the importance of tax compliance, be sure to let your employer know they can benefit by by paying their nanny legally as well.

Here are some benefits for families who pay their household employees legally:

Using a Nanny Payroll Company is Tax Deductible: Any parent, regardless of their income, can deduct the expensive of using a payroll company from their taxes.

Child Care Tax Credit: Regardless of a families combined income every family is eligible to receive a percentage in of the child care tax credit. A family who earns more than $43,000 per year can receive approximately 20% in a child care tax credit. On average tax savings are $600 per year for one child and $1,200 per year for families with two or more children.

Dependant Care Flexible Spending Account: Families can set aside tax free dollars in an account, in the range of $2,500 to $5,000- that is set up thru their employer. Only one parent can do this through their job and if they choose this option- they are not eligible for the Child Care Tax Credit.

References:
4NannyTaxes.com
Breedlove and Associates
GTM Payroll Services