San Jose’s Measure D, which will increase the current city’s minimum wage from $8 to $10 per hour effective March 2013, passed with overwhelming voter support. 

San Jose is now one of the two cities in California whose minimum wage has gone up independently of the state's.  San Francisco has enforced its own minimum wage for many years.  There are only a handful of other cities nationwide that set their own minimum wages: Washington, D.C., Santa Fe and Albuquerque, N.M.

Household employers in San Jose whose pay their employees minimum wage need to adjust their salary to reflect this new rate in March 2013.

Stay tuned for more updates from The Nanny Tax Experts.

IRS and states recently affected by Hurricane Sandy will extend tax deadlines and waive some penalties to tax payers affected by this natural disaster.

Tax Commissioner Craig M. Burns has announced that Virginia will provide a penalty waiver to those individuals and businesses affected by Hurricane Sandy. This penalty waiver applies to any late returns filed or payments made by affected taxpayers between October 29, 2012 and November 9, 2012. To notify the Department of Taxation that you were affected by Hurricane Sandy, you must write “Hurricane Sandy” at the top of your return. The Department of Taxation will then abate any late-filing or late-payment penalties that would otherwise apply.

To qualify for this penalty waiver, taxpayers must be unable to meet their filing obligations because the financial books and records they need to file their taxes are unavailable because of hurricane damage or power outage.

Many employees are not aware of what is being deducted from their paycheck. Household employees in particular (nannies, housekeepers, elder caregivers etc.) often are paid by personal check, do not have a pay stub, and work with families who themselves are not familiar with payroll and employment taxes.

Kentucky Tax Amnesty

If you are a Kentucky resident and have unpaid state taxes, penalties, fees and interests … we may have good news for you!

The Kentucky Department of Revenue has put in place a Tax Amnesty Program.  Tax payers with past due bills from December 1, 2001 to October 1, 2011 have the opportunity to clear their delinquencies and start over with the department. 

From October 1st 2012 to November 30th 2012, you can apply for Tax Amnesty from the Kentucky Department of Revenue.   Your situation will be evaluated and if you qualify, you will only owe the past due taxes and half of the interest on your bill.  Any penalties and half of your interest will be waived. 

This isa one time only program for Kentucky; don’t let this opportunity slipthrough your fingers.  This program is open for Household Employers as well. There is no second chance, after the November 30th deadline, you will not only be unable to apply, but penalties, fees and interest will also increase. 

For more information, visit the KY website: http://www.amnesty.ky.gov/

Rhode Island kicks off tax amnesty program.  If you are a Rhode Island tax payer and are delinquent on any states taxes, you will soon have an opportunity to come current on your taxes without having to pay any penalties.  The Rhode Island Department of Taxation announced the amnesty program in its most recent newsletter, joining a handful of states offering amnesty to individuals and/ or businesses.

The Form 1040 Schedule H is the vehicle that household employers use to report wages paid and employment taxes due for household workers. This form is a bit more complex for 2011 due to 2 significant events.

IRS data places "nanny tax" compliance (declaration by families of their household payroll) at about 20%. Household employment experts believe even this number is optimistic.  Looking at these statistics, a new household employer has to think that just ignoring this complicated and expensive issue is relatively risk free. What these numbers don't illustrate is the steadily increasing political pressure on the IRS to collect revenue, and the relatively low hanging fruit the "nanny taxes" present. Add to this the very real possibility that the elder care giver or nanny may file for unemployment benefits when the job ends, and the risk evaluation changes dramatically.

Monday December 19, 2011 Update: What appeared a certainty two days ago is suddenly in jeopardy today. The House of Representatives is poised to reject the Senate's 2 month extension of the payroll tax holiday - insisting on a bill that funds the extension for a full year. We are watching this...

We have helped families with their nanny payroll and tax issues for nearly 20 years. Some family and nanny questions are timeless. Here is a little of what we hear. Remember, there are very thorough answers to many common questions in our online FAQ.

1. I had a serious misunderstanding with my family and left my nanny job without notice. I received a text from my employer, a lawyer, asking for my mailing address so she could "1099" me. Isn't she supposed to give me a W-2? What does this mean?

Nannies are employees of the families that they work for and the wages nannies receive are subject to Federal and State employment taxes. These employment taxes are paid to the government by the employer, and the employer is entitled to deduct your portion from your paycheck. If the employer does not deduct, THEY remain responsible for paying. YOU are responsible for your income taxes.

Your employer is legally obligated to provide you a W-2 form no later than January 31, 2012 for your 2011 employment.

2. I agreed to work for a family for cash - under the table. We agreed on a rate knowing that no taxes would be deducted or reported. My boss has been collecting money from a special tax free account, and just learned she has to pay taxes and report my income. What does this mean to me?

When you agree to work under the table both you and your employer are agreeing to violate tax law, and there can be consequences to both of you if you are caught. Fortunately for you, it sounds like this can be rectified in a timely manner assuming you are referring to 2011 wages.

Your employer will need to give you a W-2 that documents the wages you were paid. She will file this with the Social Security Administration. She will have to pay the IRS the Social Security and Medicare taxes on your wage, and will likely need to pay unemployment taxes too. Your W-2 will show that NO income tax was deducted from your wage; this is legal in household employment. You will need to complete an annual income tax return to calculate the amount of tax due, if any, and make your payment to the IRS. Don't ignore the W-2 - the IRS will know you received one and will catch up with you sooner, rather than later. Enforcement is always stepped up when there are budget deficits and government programs awaiting funding.

3. I hired a foreign nanny who is here legally on a visa but she doesn't have a Social Security Card. What do we do about the taxes?
There are two possible scenarios at play here. The first is that your nanny is both legally present and legally authorized to work in the U.S. and is simply awaiting her SSN. If that is the case, the situation will resolve in about 6 - 8 weeks as that is the typical turn around time for a Social Security Number application. You need to report all income and pay all taxes from the date she starts, whether she has the number yet or not. Depending on your state taxing authority, you may incur a small penalty on your first filing if this number is not included.

The second possible scenario is that your nanny is legally present (has a visa) but does not have authorization to work in the U.S. By hiring her you both are in violation of U.S. law. You the employer are only permitted to hire citizens, permanent residents, or legal non-immigrants with a valid work visa. She too is violating her visa. This is a somewhat common occurrence with foreign students admitted to the U.S. to pursue university studies. You will have all of the employment tax obligations of an employer - the IRS does not care if your nanny is legal to work or not. Your nanny will file a W-7 application for a Individual Taxpayer ID Number (ITIN) with her first tax return (usually a 1040NR) and be issued an identifying number by the IRS. Therefore, for the first year all of your filings will be missing a SSN/ITIN, but in future year filings you will be able to utilize her ITIN for tax payment purposes.