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Household Payroll, Hypothetically

Posted by Mary Crowe, FPC on 5/13/14 8:12 AM

Last Friday, HWS' Client Care Manager Mary Crowe took a phone call that went along these lines:

Nanny payroll taxCaller: I have a question.

Mary: Happy to help! What is your question?

Caller: I am a client and want to know how to handle a situation.

Mary: Ok, may I have your name so I can look up your account?

Caller: No, I don't want to give you my name right now. {pause, deep breathHypothetically, what would one do if the wages they reported last year kind of mis-stated the actual payments?

Mary: Well, hypothetically the right thing to do is acknowledge that math mistake and correct your returns...

Caller: Well what do you do hypothetically if the nanny worked for you for many months before you put them "on the books"?

Mary: Well, hypothetically the right thing to do is acknowledge your mistake and file and pay the missing taxes.

Caller: Well what do you do hypothetically if you fired that nanny and she is filing for unemployment?

Mary: Well hypothetically you move really fast and correct the record before the state comes after you. Can I have your name so I can help you out? We can fix this!

Mary relayed the call to me and observed "Kathy, you know we solve the same 10 client problems over an over again. What can we do to help educate these clients before they find themselves in these messes?"

Understatement of household employee wages on tax reports can sound like a great idea, hypothetically. The family saves on taxes, and often it helps the employee remain qualified for various social services that are income based. A win-win. That is until a relationship ends badly, either the caregiver is let go or the caregiver suffers an on-the-job injury. A nanny or senior caregiver living paycheck to paycheck faces a difficult choice - either continue the charade and accept dramatically lower unemployment payments or punishing medical bills, or come clean and allow the employer to deal with the consequences.

We are here to help, and it is all fixable. I think we can all agree, however, that it is better in hindsight to deal with these matters properly from the start.


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Topics: household employee taxes, nanny payroll tax

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