The call came the other day. The family you loved interviewing with and playing with their kids has asked you to be their nanny. The pay is what you wanted. But wait, are they planning to pay you professionally so you can count on benefits and protections, such as unemployment, retirement, workers' compensation, disability, etc.?
Very few families have experience as an employer, so mistakes and oversights are commonplace. You can protect your own interests by making sure your employer knows you want to be paid legally. No matter how much you love the kids, you don't want to get involved in tax evasion.
Watch this video for advice from Care.com's senior managing editor Katie Bugbee on why you should be paying taxes and how to talk to your employer about them. Then check out the tips below for more on how to convince your family to pay you legally
You Are Building Your Future
The employment taxes ensure that you'll have critical retirement benefits. Social Security and Medicare provide benefits from age 67 until death. However, each worker's benefits are based on their reported income during their working years. The more you report over the years, the more you get during retirement. Workers who allow themselves to be paid under the table will not be entitled to these vital benefits.
There are Tax Breaks to Offset Costs
Families can offset most (if not all) of the employer tax costs by taking advantage of one of two childcare tax breaks: their Flexible Spending Account and the Child Care Tax Credit. Families with two or more children can take advantage of both tax breaks. You can use a Nanny Tax Calculator to find out how much it will cost the family, and how much they could get covered. Learn more Employer Benefits to Paying Nanny Taxes ?
Nannies Are Not Independent Contractors
Some families think nannies can just fill out a 1099 at the end of the year. But this is illegal. And the IRS and Department of Labor are trying to crack down on what they call "worker misclassification." This rule is to protect the nannies, housekeepers and other household employees because misclassification hurts the worker. How? Independent Contractors are not entitled to Unemployment Insurance and they have to pay both the employer and employee portions of the FICA taxes (Social Security and Medicare) -- which adds another 7.65 percent to the worker's tax rate.
You May Need Unemployment Benefits One Day
Say one day, after the kids you nanny for move on to elementary school, the family has to let you go. They are so sad, but they just don't need you to nanny anymore. Then, say, it takes a while to find another job. And you need to pay your bills. You might need to file for unemployment. If you and your employers haven't been paying taxes, the unemployment office will not give you benefits to replace your income. Additionally, the tax agencies will investigate the family you've been working for. This is one of the many ways families get in trouble for tax evasion.
For more information about legal pay and how it benefits you and your employer, check out Care.com HomePay, managed by Breedlove. You can find a wealth of information, tools and resources that can make legal pay easier and less expensive for you and your family.
Your Next Steps:
For more tips and advice, check out these Nanny Tax Articles.