You’ve found a nanny to care for your children and now comes the conversation of payment and taxes. If your nanny doesn’t want you to report her wages or pay taxes, how should you respond? It may be convenient to pay your nanny under the table, but not only is this illegal, it could be very costly if you end up getting caught. Failure to pay nanny taxes could result in hefty penalties and fines, often in the thousands of dollars range.
Here are some additional reasons why you should pay nanny taxes:
- You will avoid fines
- You will not risk submitting a fraudulent personal tax return
- You will protect yourself as an employer
- You will ensure that your nanny will get Medicare/Social Security benefits when she decides to retire
- Your nanny will get unemployment benefits if she stops working for you
- You will qualify for child care credits and tax advantaged dependent care accounts
In the eyes of the law, your nanny is considered your household employee, not someone that you can pay secretly. If you do, it can put your family at risk or could jeopardize your employment or career advancement if you are found guilty of tax fraud. Do your research: you may need to withhold Social Security and Medicare on the wages she earns and include them on her payroll stub, and you may need to pay federal and state unemployment tax.
If you feel overwhelmed thinking about paying nanny taxes and you believe it will take you longer to research and prepare them, we can help. Here’s how:
- We can calculate everything you need including paycheck deductions, bonuses, benefits, and taxes
- We can direct deposit your nanny's pay every week
- We can file all of the required paperwork
- We can take care of any other miscellaneous details on your behalf
A simple mistake in nanny tax preparations could mean unexpected taxes, costs, or penalties, so it is important to prepare your nanny taxes with accuracy and attention to detail. Planning ahead and working with a household payroll specialist from the get go is a great way to get you and your nanny set up for accurate tax deductions and efficient payroll distribution for the duration of your nanny’s employment.