Household Employment Blog | Nanny Tax Information

Trust Company Liable for Non-payment of "Nanny Taxes"?

Written by Kathleen Webb | 7/10/12 8:56 PM

Reprinted from March 2007

Situation:
A bank trust department handled the financial affairs of an elderly widow for more than a decade before her death. Included in these affairs was the weekly payment to the housekeeper/companion who lived with the widow. Employment taxes were never paid and wage statements were never given to the housekeeper. Upon the widow's death, the trust was dissolved and the assets distributed to the woman's heirs.

Update:
The housekeeper filed for Social Security benefits approximately two years after the employer's death. She learned that the SSA had no record of any taxes being paid for the many years she worked for the widow. The housekeeper had several check stubs documenting the payments from the widow's trust, so with the help of SSA, she filed the paperwork to request a revision of her record. Several months later, the bank trust department received an SSA Employer Questionnaire stating that the SSA has no record of an employment report that requires a response.

Conclusion:
There is no doubt that the housekeeper was the widow's employee. One would imagine that the trust officer would or should have been aware of this also.

The government's claim for back taxes is to the widow's estate, followed by a claim to her heirs presuming the estate has gone through probate. A big unanswered question is does the estate have a claim against the trust officer and the bank for failing to execute fiduciary responsibilities to the trust? I suspect so. The original amount of the tax, if paid timely, was approximately $45K. With accumulated penalties and interest, the amount due is now in excess of $93K. A not insignificant amount of money.

Learn more about your employment tax obligations when you privately employ a senior caregiver: