Congress tackled the "Nanny Taxes" in 1995 to streamline reporting on the family's personal income tax returns* and to establish a threshold level of wages that a family has to pay before triggering 'nanny tax' obligations.
The nanny tax threshold was set at $1000 and a mechanism was put in place to adjust this amount going forward in $100 increments to account for inflation.
Families with household workers must pay the nanny taxes when wages paid to a household worker such as a nanny, housekeeper or senior caregiver are $1800 or more in the calendar year. This threshold will change to $1900 in 2014 according to an IRS announcement earlier this month.
* It is important to note that 'simplifying' the nanny taxes onto a family's personal income tax return was in fact a Trojan horse.
Taxpayers submit their personal income tax returns under penalties of perjury. By moving the nanny taxes to the personal tax return, Congress in fact stepped up the potential penalties a family faces if they fail to report and pay the nanny taxes AND made the nanny tax fair game in personal income tax audits.
The end of year is fast approaching. If you have a household worker and have not yet taken steps to begin paying your state and federal nanny taxes, now might be an excellent time to look into outsourcing. Now through November 30, we are offering special discounts to new clients. Don't delay, the offer will absolutely end November 30. Avoid the end of year rush and madness - contact HomeWork Solutions and knock the nanny taxes off your to do list!