Congress is debating Immigration Reform, legislation that would establish a path to citizenship for the about eleven million undocumented workers living and working in the shadows today, bypassing tax law obligations. A good portion of these are employed as household workers such as nannies, housekeepers and senior caregivers.
HomeWork Solutions is a leading national nanny/household employee payroll and tax company. We work with thousands of families, and hear and respond to the same questions/concerns over and over again. We want to take the opportunity to share this information with you through this easy to follow Q. and A.
Topics: babysitter nanny tax, worker misclassification independent contractor, domestic employer legal responsibilities, nanny non-exempt employee, nanny independent contractor, nanny tax compliance, nanny job description
The Lamonica v. Safe Hurricane Shutters Inc. (11th Cir., 11-15743, 3/6/2013) ruling by the Eleventh Circuit Court confirmed that a worker's immigration status has no bearing on the worker's right to sue to recover unpaid overtime pay. The decision affirmed a lower court ruling in favor of the undocumented workers that awarded unpaid overtime and damages.
Nannies, housekeepers, elder caregivers, and most house managers are considered Hourly, Non-Exempt employees under the Fair Labor Standards Act. This means that most are covered under both minimum wage and overtime laws. Accurate and contemporaneous time tracking and records maintenance is a legal obligation!
Families sometimes try to completely side step their employment tax obligations by giving the nanny a 1099 form at year end. In so doing, they avoid paying their share of Social Security and Medicare taxes, as well as unemployment taxes, and they push their tax obligations on to the nanny. This path allows the family the benefit of child care tax credits without the corresponding expense of paying their portion of the employment taxes.
Household employees - nannies, maids and housekeepers - and the families that employ them often don't understand how payroll tax, labor law, and the unemployment insurance system apply to this particular employment situation.
California is striving to shine a light on its underground economy. At the end of 2011, the LA Times reported that employers who pay their workers under the table - to avoid payroll taxes, workers’ compensation insurance and other government mandates - cost the state about $7 billion annually in lost tax revenues. Last week, California’s Labor Enforcement Task Force set up a public hotline for workers and employers to call in complaints and provide enforcement tips. Employers who are playing by the rules want to create a level playing field by "ratting out" their competitors who cheat. One state official notes, “The hotline will be a valuable tool to gather information and bring into compliance those employers who treat workplace safety and wage and hour laws as a nuisance”.