Do You Think Most Nannies Are Not Paying Taxes?

Tax Justice Network: U.S. is country with largest tax evasion

Why Are Nannies Having a Harder Time Finding Great Jobs?

The results of the Be the Best Nanny Newsletter monthly poll show that nannies blame illegal immigrants working at nanny jobs as the number one reason American citizens are having a hard time finding great nanny jobs. Next, participants of our survey blame the economy and parents being out of work as the second most significant reason its hard to find nanny jobs.

The third most common answer in our poll was that it is hard to find great nanny jobs because so many American citizens are paid illegally in cash, working off-the-books.

The Internal Revenue Service (IRS) and popular media estimate that up to 90 percent of in-home childcare providers are paid illegal in cash, off-the-books.  The chart to the left shows that the World Bank and Reuters report that the United States has the most tax evasion than any other nation in the world.

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.

The Penalties of Not Paying Taxes

Paying off-the-books is tax evasion which is subject to fines, back taxes, interest, and even prison time. The amount you owe to the IRS, if you don’t file, is penalized at 47.5% interest (22.5% for late filing and 25% of the total for not filing).

To collect monies owed, the IRS can levy your wages, your bank account, and/or put a federal tax lien against your social security number.

Since tax evasion is a felony, there are strict penalties of jail time and loss of professional license. For example, licensed professionals such as doctors, attorneys, and accountants can lose their licenses and ability to practice their profession if caught for tax evasion.

In order to convict you of a tax crime, the IRS does not have to prove the exact amount you owe.

Here are some penalties listed in order of their severity:

Criminal fraud:This is tax evasion, which is illegal. If convicted of this penalty the tax payer will be subject to heavy court determined fines, imprisonment, or both .

Civil fraud: Tax payer fraud that does not rise to the level of criminal fraud. If imposed, the penalty is 75% of the portion of tax underpayment attributable to fraud.

Negligence: This is a penalty imposed if any part of the tax rules and regulations are neglected without the intent to defraud. The penalty is 20% of the portion of the underpayments attributable to the negligence.

Frivolous Return: A frivolous return is one that emits certain information necessary to determine the tax payer’s tax liability, such as her Social Security number. The penalty is $500 for each frivolous return filed.

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.