This article uses a factual scenario common to many nanny hires in order to help provide some guidance and clarification to families and nannies when negotiating nanny compensation.
After I had my first child and as my maternity leave days were coming to an end, I realized that I would need to hire a nanny to help me take care of my newborn. I interviewed a few candidates and fell in love with Sarah; she seemed to really, genuinely care about my baby. I felt confident with her; she was truly the best fit for my family. Sarah was offered $500 a week. She accepted my offer and was hired right away!
We love our nanny; she is a blessing to our family. She is such a great help with encouraging my son’s development and individual growth, and she has helped us to grow as parents as well. Every Friday, I pay Sarah $500 in take home pay, we were so lucky she took our offer. I certainly didn’t know at the time that I made the offer what $500 a week really meant, and neither did Sarah.
After sharing my wonderful nanny experience with a colleague at work, she asked me how I was handling the Nanny Taxes. I said, “What? …” and here is where the real story begins. My colleague, who has household help, recommended that I call the company she uses – HomeWork Solutions.
I called them the next day and one of their knowledgeable representatives explained that the moment I hired Sarah, I became a Household Employer, with legal obligations and tax responsibilities. The estimate of taxes for a household employer is 10-12% above the nanny’s gross salary. Not only that; but when I offered Sarah the weekly take-home rate of $500, I was also assuming her share of Social Security and Medicare Taxes (7.65%) and may have agreed to pay her income taxes as well. Now I have to go back to the two wonderful years Sarah has been working for us and pay all back taxes + penalties + interest - I didn’t expect that!
Thankfully, HomeWork Solutions had handled these situations before. They opened my tax accounts and helped me file all my back taxes. They even helped me with figuring out how to explain all of this to Sarah! Now I am up to date with my nanny taxes. I no longer wake up in the middle of the night dreaming that the IRS is after me. The “Nanny Taxes” apply to ALL kinds of household employees and there is no “I didn’t know” excuse for the IRS to avoid the household employment tax obligations!
Don’t make the same mistake I did – Request your FREE telephone consultation with HomeWork Solutions today!
Video - Nanny Net Wage Agreement
This employer’s experience is based from similar experiences we hear from our clients every day, so while Sarah and her employer are fictional, we hope you find their story helpful!