Navigating Nanny Taxes and Household Payroll Compliance
Time is precious for most of us these days, and often, we need help at home so we can have more time to run our businesses or careers. That may mean hiring help for personal tasks such as caregiving for the young, elderly, or special needs family member. When you first hire a household worker, there’s a whole different set of rules to follow compared to hiring for business.
There is a whole industry of “underground” payments made to domestic workers. Individuals such as housekeepers, regardless if they live with you full time or work once a month, are wrongly paid as contractors, and often in cash, most of the time. According to the IRS, in court case after court case, these workers should be paid as household employees, even if they are part-time.
One of the focus areas for the IRS is this area of household payroll. The current and strong drive to bring this underground payment system to the light is caused by several new pieces of legislation. A few states have recently passed a domestic workers bill of rights. Changes in minimum wage and overtime requirements are going into effect in 2015. And the health care act requires workers to document their wages before they can qualify for a subsidy, so this can bring more workers asking you to get them fully documented on your books.
Getting It Right
The need to hire household workers is rising due to the silver tsunami – a term describing the aging of the populous Baby Boomer generation and their growing need for health care, which will truly stretch our system based on their numbers.
When your family makes the decision to hire household workers, seek expert guidance so that you can get through the maze of compliance in this area. You’ll want to be sure you learn about the risks and compliance issues in this area so that you can properly protect your personal wealth as well as your peace of mind. And if we can help, please reach out and let us know.