Part Time Nannies, Summer Nannies
MYTH “My nanny only works during the summer months when our kids are out of school. I don’t need to worry about nanny taxes since she is only a temporary employee.”
BUSTED. In fact, the time (full- or part-time) and period (summer, school year, year round) that the nanny works is of no interest to the IRS. Regardless of whether your nanny is full time, part time, or a temporary summer employee, you are responsible for nanny taxes if you pay your nanny more than $1,900 per year. Assuming you hire more than the occasional date night babysitter, you probably find your self in this category.
MYTH “My part-time nanny is 19 and prefers to be paid in cash. She works at least two nights each week and I’m pretty sure I have paid her more than $1,900 in the past year. However, I don’t think I need to pay nanny taxes because she asked to be paid under the table. She’s too young to pay taxes anyhow.”
BUSTED. Even if your babysitter is part time, you are still responsible for paying taxes on her wages. While she may not care one way or another if you pay nanny taxes, you put yourself at risk for fraud in the case of an IRS tax audit. The US Department of Labor stepped up the wage and hour enforcement, as well as prosecution of misclassification of employees as independent contractors.
Nannies and Social Security
MYTH “My family recently hired a 68 year-old part-time nanny who is already collecting on her social security payments. Since she’s already receiving them, I am not required to pay social security taxes on her wages.”
BUSTED. Age has nothing to do with it. If your nanny collects wages greater than $1,900 (the nanny tax threshold), you are obligated to pay the Social Security and Medicare taxes.
Nanny Taxes and Immigration Status
MYTH “My live-in nanny is a legal immigrant from my wife’s home country of South Korea. Is she qualified for an income tax holiday as a recent legal immigrant? I heard somewhere that she may receive some income tax benefits for immigrating.”
BUSTED. This myth is just too good to be true! There is simply no such thing as an income tax holiday for recent immigrants.
MYTH “Our nanny is the sweetest old woman, and my family loves her. However, she has shared with us that she is not a legal immigrant and is anxious to be paid ‘under the table’ because of her immigration status. Therefore, I shouldn’t pay nanny taxes.”
BUSTED. The IRS is not concerned with your nanny’s immigration status. They are an equal opportunity taxing authority! Failing to pay nanny taxes could make a bad situation worse by putting you at risk for investigation for tax fraud. For more information, see our discussion on illegal household workers.