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Nannies, What Do You Do When You Owe the IRS More Tax Than You Have?

Posted by Kathleen Webb on 4/14/14 1:59 PM
April 15 is the deadline for income tax filings for a nanny, senior caregiver or housekeeper in the United States.

nanny income taxAt a National Nanny Training Day session in Manhattan this weekend, HomeWork Solutions' Kathy Webb was asked the following questions:

Q. I did my taxes last week and found I owe the IRS $1400. I just paid my rent and I don't have enough to pay this now. What do I do?

A. A nanny or senior caregiver can often find themselves in the situation where they owe the IRS more than they have available to pay. This happens to Americans in other occupations too. "The temptation to just not file the tax return is a natural one," reports Webb. "Not filing the return is the worst possible action."

Webb explains "When you owe the IRS and cannot pay on time, you are subject to both penalties and interest. The penalty for not paying on time is 1/2 a percent (0.5%) per month. Meanwhile the penalty for not FILING on time is 5% per month - a very expensive proposition." Webb advises that you file the tax return anyway, on time, and separately contact the IRS to arrange a payment plan.

Q. I got a W-2 from my nanny familiy but they didn't take out any income tax. I cannot afford to pay that now, can I make them help?

A. "Household employers have no legal obligation to withhold income taxes from their household employee's paycheck. The obligation for income taxes is totally the responsibility of the household employee (nanny, housekeeper, senior caregiver)," advises Webb.

Webb goes on to suggest that ALL household workers should receive an itemized accounting of the deductions that are being taken from their paycheck. If the family doesn't use a payroll service, which provides the nanny a check stub, the family can use a free paycheck calculator to do the withholding calculations for the household employee. You can request that the family withhold your income taxes - if they say no, you need to personally set this money asided every pay check and become familiar with filing of quarterly estimated taxes you don't end up in the same place next year. 


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HomeWork Solutions' Kathleen Webb frequently speaks before groups of household employers and employees, providing educational and consultative information to help them avoid risk and keep their ideal caregiver. Contact HomeWork Solutions if you would like to discuss booking Kathy for your group.

Topics: nanny income tax, household paycheck calculator

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