April 2015 Update

The survey referenced below is now closed and published. HWS encourages you to review the results.

The INA reports the following:

Key findings include:

• Average hourly rate USD$18.66, $1/hour increase from 2012
• 49% have had a salary increase in prior 12 months, up from 38% in 2012
• Education and experience correlate with higher hourly wage
• 60% received an annual bonus in 2013, up from 53% in 2011
• INA Credentialed nannies average $19.96 per hour
• 64% are paid legally

I recently attended Nannypalooza in Philadelphia where I was asked by a nanny in attendance if I could coach her on how to speak to her employer about being paid on the books. Immediately several other nannies joined the conversation, sharing that this is one of the most difficult conversations to initiate with their employers.

(October 1, 2014)

Nannies and senior caregivers who work in a private home, receive instructions and directions from the family employer and are paid by the family (either directly or via a household payroll company) are employees in the eyes of the IRS and US Department of Labor. As employees, many aspects of compensation and payroll are governed by payroll and labor law, no different than employees in a department store, factory or othr workplaces. Tax and labor law that covers household employees are often unique, and all too often neither the family nor the caregiver know the important details. Household payroll literacy on the part of a nanny or senior caregiver is important as they negotiate pay and benefits with their employers, many of whom don't understand these key points themselves.

Do you hire, manage and issue payroll to a beneficiary’s caregiver(s) in your capacity as a trustee? If so it is important to understand the legal and tax obligations this type of employment creates for both the trust and you personally.

Understanding the Household Employer's Role with Unemployment

The work agreement (sometimes called a contract) you negotiate with your nanny, housekeeper, or elder care provider sets the professional tone of the work relationship right from the start. A carefully thought out work agreement will help the employer avoid future problems and misunderstandings with the employee.

HWS has been providing Nanny Tax compliance services since 1993. Did you know, in a recent client survey, the biggest motivation for employers in outsourcing nanny tax compliance is the time saved?

How much time an individual would spend on their nanny taxes will of course vary between individuals. The IRS estimates that record-keeping, keeping familiar with the law, and tax return completion can run 60 hours per year. Record-keeping accounts for the lions share of the time, an activity that needs to be done every payroll period.

I was chatting with a client today. This gentleman has used our services for many years, and his household circumstances are changing. In the course of the conversation, I asked him what factors caused him to continue using our services year after year. He answered without hesitation "The time savings!" He went on to state that he actually spends only about one hour a year on his nanny taxes - primarily in collecting his information and responding to our quarterly requests for wage reports. (This client is a NaniTax Plus subscriber.) He was certain that he had never filed a tax return on time before hiring HomeWork Solutions, and that the savings in late fees alone was more than our fee. I suspect some exaggeration, but not much!

The CPA or accounting professional is often the first resource a family consults when hiring a nanny or senior caregiver. Families have questions about their tax responsibilities and the myriad rules and responsibilities that surround their new role as a household employer. You of course are knowledgeable about household employment taxes (the so-called “nanny taxes”) and have probably assisted many families to report and pay these taxes as part of your personal income tax practice.   While you and the family can of course refer to IRS Publication 926 for specifics about Federal household employment tax reporting, your experience tells you this is not the end of the story.