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Summer Nanny & the Nanny Taxes

Posted by HomeWork Solutions on 7/9/15 3:07 PM
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Summer_NannyThe_Nanny_TaxesIt’s that time of year again: summer is here and that means your children are out of school. Your children are likely looking forward to a lot of fun and relaxation during the warm summer months, but for you, these months may cause a bit of anxiety because you could be left scrambling to find reliable childcare during the time that you're at work.

The summer childcare challenge:

Day camps, relying on friends and family to watch your children during the day, and taking vacation time during the weeks of summer break can only go so far. You still need to work your regular hours and finding childcare can leave you scrambling and stressed out. There has to be a short term solution! Hiring a summer nanny can be a great option, but you may be confused on what that means when it comes to paying employment taxes for that service. Paying your nanny “under the table” or “off the books” may convenient at the time, but it has the potential to cause negative repercussions should your nanny choose to file for unemployment benefits later.

Potential situation:

You find a nanny that blends perfectly with your family. She is a college student on break for the summer and has the right amount of experience and a personality that has really connected with your children. You hire her for two summers in a row and you both decide that you will pay her a flat rate per month, off the record. After the second summer, your nanny decides she needs to find a full time job instead of continuing with college classes, but has a hard time finding a job. So, she files for unemployment benefits through the government and lists you as her employer for the last two summers. Under the law, this means that she was an employee and you are responsible for paying for her employment taxes, even though you had a mutual agreement to pay her off the books. Paying for her unemployment taxes after the fact can total hundreds and even thousands of dollars that you will have to pay for out of pocket!

The solution:

If you pay your nanny more than $1900 over the summer, you will need to factor in the tax obligations that come with it. Not sure how to handle the tax portion of your nanny’s paycheck? Or, if the thought of covering your nanny’s taxes makes you fearful of doing it wrong or incompletely, enroll in the HWS payroll tax preparation service. We can get you registered with the IRS and the state you live in, get tax identification numbers and work to get everything you need to pay your nanny accurately, with taxes included.

Planning ahead and paying the nanny transparently from the start of employment means that you can avoid paying unexpected penalties or taxes down the road.

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Topics: summer nanny

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