If you have recently hired a new employee to work in your home, it’s important to get their payroll details lined up immediately. Deciding to pay them partially off the books to save on taxes, but partially on record to contribute to their work history, is illegal and you’ll only create a headache for yourself later when the full picture comes to light. Here, we’ll explain why.
When an employee is terminated involuntarily and without cause (position no longer needed), they may by eligible for unemployment benefits. Benefit payments are based on the history of wages reported as paid to the employee. If the Department of Labor discovers that their weekly wages do not match what was reported, they will investigate the case. Ultimately this may delay payment of your employee’s unemployment benefits, causing financial hardship for them, and it may get you into hot water.
If you are caught under-reporting your employee’s wages, you will have to amend all quarterly and annual filings. This is costly as you will have to pay taxes, penalties, and interest on the under reported wages, as well as pay a tax professional for the time required to complete amendments. Furthermore, you could be subject to an audit. Such audits may unearth other reporting mistakes, and at the very least will create quite a hassle.
If your employee wants to rent an apartment, buy a home, purchase a car, or any number of other things, they will need to show proof of their income. If their income doesn’t match what they claim to make, they may be denied financing and forced to delay moving forward with these important life purchases. Furthermore, your employee might also miss out on benefits they have earned, such as receiving their full social security benefit amount when it comes time for them to retire.
HomeWork Solutions can help!
Setting up your employee’s payroll and tax withholdings correctly from the initial date of hire is essential. If you aren’t sure how to do so, or you simply don’t have the time, our experienced professionals at HomeWork Solutions can do the work for you. Contact our team today at 1-800-626-4829 or info@homeworksolutions.com to learn more about which service plan is right for you.