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2016 Nanny Tax Round-up

Posted by HomeWork Solutions on 12/20/16 8:49 AM
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2016 was a busy year in household employment. From Domestic Worker Bill of Rights legislation, stepped up enforcement of independent contractor misclassification and the implementation of Fair Labor Standards Act updates impacting in home senior caregivers and domestic worker overtime eligibility, the states and Federal governments have been busy in this arena.

2016 Nanny Tax Highlights

Illinois Domestic Worker Bill of Rights: 

Illinois became the 6th state to enact formalized labor law protections for household workers. Effective January 1, 2017, the  Illinois Domestic Workers’ Bill of Rights amended 4 existing labor laws to extend coverage to domestic service workers. These include the Illinois Minimum Wage Law, the Illinois One Day in Seven Law, the Illinois Wages of Women and Minors Act and the Illinois Human Rights Act.   LEARN MORE  

California Domestic Worker Bill of Rights:

Originally enacted January 1, 2014, the original legislation was planned to sunset on December 31, 2016. The sunset provision was removed in legislation in 2016, permanently codifying these labor law protections for California househld workers.    LEARN MORE  

Joint Federal | State Enforcement of Independent Contractor Misclassification

In 2011, the US Department of Labor, the Internal Revenue Service and 13 states entered formal information sharing agreements specifically designed to find and prosecute employers who improperly classify their workers as independent contractors to avoid payroll taxes, workers compensation insurance and various labor laws. The success of the early efforts caused the program to snowball, and on October 6, 2016 Oklahoma became the 35th state to join in the effort.

The three pronged approach to enforcement includes outreach to employers and employees with clear messaging, resource sharing for enforcement, and for the first time ever formal information sharing among agencies.  While class action lawsuits have earned the largest financial returns to improperly classified workers, wage and hour complaints and unemployment insurance filings by discharged workers are the two most common ways employers who misclassify are discovered.     LEARN MORE  

Fair Labor Standards Act and In-home Senior Caregivers

In 1974, the Fair Labor Standards Act was amended to cover household or domestic service employment and extend minimum wage and overtime protections to in-home workers. Specifically exempted at that time were companion caregivers for seniors. This "companionship exemption" from minimum wage and overtime was dramatically narrowed, and effective in 2016 nearly 20 million senior care workers gained minimum wage and overtime protections.   LEARN MORE 

 Changes for Nanny Taxes in 2017

 2017 Household Employment Wage Test

For 2017 the wages paid to a household employee that triggers a "nanny tax" obligation remains at $2000. You are responsible for Social Security and Medicare taxes on all wages paid to a household worker when they are paid $2000 or more in the year. A domestic employee's earnings are not subject to Social Security taxes if they do not exceed that threshold for the year.

2017 Nanny Mileage Reimbursement Rate

Beginning January 1, 2017 the IRS business mileage reimbursement rate goes down to 53.5 cents per mile. Blame 2016's lower fuel rates for that one. Mileage reimbursement is for the nanny's use of her personal vehicle to perform her job for your family - school drop off and pickup, errands, activities, etc.

Qualified Parking and Transportation Benefits

The most an employer may reimburse for qualified transportation and parking fees is $255 monthly in 2017.

New Jersey Reciprocal Agreement with Pennsylvania

After previously announcing that NJ would end its reciprocal tax agreement with Pennsylvania, NJ Governor Christie reversed his decision on November 28, 2016. There is no change to income taxation for Pennsylvania residents working in New Jersey.

 

 

Topics: domestic workers bill of rights, worker misclassification independent contractor, companionship exemption

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