Hard Choices for Household Employers - Immigration Reform and Nanny Tax Compliance

Congress is debating Immigration Reform, legislation that would establish a path to citizenship for the about eleven million undocumented workers living and working in the shadows today, bypassing tax law obligations.  A good portion of these are employed as household workers such as nannies, housekeepers and senior caregivers. 

The Senate gave final approval to legislation that would dramatically change the lives of these domestic service workers.  Qualified applicants will receive significant benefits, such as eligibility for unemployment and an opportunity for citizenship; however, applicants must first fulfill some requirements, such as compliance with employment related taxes that have been avoided in the past.  Now, these will be a decisive key for aspiring applicants.

Household employers will be faced with an important decision: either begin paying these household employment taxes or continue paying wages under the table and deprive their immigrant employees of the opportunity to qualify for legal residency status.  Which choice will they make?

- Applicants must have been continuously living in the US before the cut off date of December 31, 2011.

- Be current on their employment and income taxes, late fees, penalties and fines when applicable.

- They need to learn the English language.

- Household employers must cooperate with their employees and pay their portion of employment taxes.

Helping undocumented workers attain legal status carries with it a significant cost. Household employers will be forced to either pay the workers on the books, increasing their tax obligation, or let their worker go.  The vast majority of immigrant domestic service workers, and the families they work for, have been content to mutually avoid employment taxes when there was little benefit and little risk of detection.  To qualify for the Senate’s immigration reform plan, though, all applicants must be current on their taxes.  Going on the books will cost the household employer an additional 10 – 12% for taxes they are required to fund.

Household employees will face hard decisions themselves - whether to pursue the legislation's offer of legal residence and work authorization, with a path to citizenship and demand to be paid on the books, or risk losing their job to others willing to work for cash.

Immigrants will have the opportunity to fully integrate into the communities in which they live.  They will receive legal residency with a 13 year path to citizenship.  Importantly, they will qualify for unemployment benefits that help them financially when they are between jobs.  Immigration reform can certainly mean hard choices for undocumented caregivers working in the shadows; but will the desire for stable and legal work and residency be sufficient incentive for domestic service workers to insist on payroll tax compliance?

What do you think? Will these workers want to pay taxes in exchange for legal residency status? Will these families embrace the opportunity to help their immigrant nannies and caregivers in the process?

Vanessa Vidal, FPC
HomeWork Solutions Inc.