40 Reasons to Pay the Nanny Tax



You've heard of the nanny tax. You know you should be paying your caregiver legally, but you're not an expert and have lots of questions.

Here are 40 reasons you should pay taxes for your nanny or other caregiver.

  1. Its the legal thing to do.
  2. Its the right thing to do.
  3. It protects you from potential felony tax evasion charges.
  4. Once you get the paperwork going, it's not that difficult.
  5. You might qualify for the Child Care Tax Credit -- that means you could get up to $1,200 back!
  6. You're taking care of the person who is caring for your children.
  7. Your nanny can build credit towards Social Security in retirement.
  8. You can hire Care.com HomePay to handle all of the tax and household payroll details for you.
  9. It raises the standards of the nanny profession.
  10. You don't have a nanny, but you pay your regular housekeeper, senior caregiver or other employee more than $2,100 per year. Yup, nanny taxes aren't just for nannies.
  11. If you're ever elected to public office, you wont have to worry about things like Nannygate.
  12. You can tell your kids how you're following a rule, even if you dont want to, because it is the law.
  13. Your nanny will appreciate that you're looking out for their best interests.
  14. It helps your nanny establish an employment history that can be verified, which makes it easier to qualify for loans on things like a car, a mortgage or school.
  15. Paying taxes is your civic duty.
  16. Your nanny asked you to.
  17. It's easier for your nanny to qualify for unemployment benefits if you eventually need to let her go.
  18. You can help your friends with their many nanny tax questions.
  19. You may be able to use an employer-provided Dependent Care Account (a type of Flexible Spending Account) to pay for up to $5,000 of child care expenses tax-free. That can save you around $2,000!
  20. Your avoidance of paying taxes wont come back to haunt you in five years if the IRS or a state tax agency audits you.
  21. You and your nanny will learn about the differences between net pay and gross pay.
  22. When you need to hire a nanny, your policy of paying taxes will attract more professional candidates who take their jobs seriously.
  23. Your nanny will only qualify for the Affordable Care Act health care subsidy if they're paid legally. To apply for the subsidy, they have to report their wages and be cross-referenced by the IRS.
  24. If you or your partner is a lawyer, doctor, financial advisor or one of several other careers, you may be in danger of losing your license or professional standing by not paying taxes.
  25. You'll actually save money if you dont have to pay the back taxes and the accompanying (sometimes large) penalties for not paying taxes for your nanny from the start.
  26. You'll learn the difference between taxes and payroll.
  27. You'll know how to file for tax ID numbers.
  28. When someone asks you at a cocktail party if they should pay the nanny tax, you can not only tell them yes, but then explain why.
  29. Your nanny will feel appreciated once you explain the benefits of paying the nanny tax.
  30. Your nanny may be eligible for Medicare when they retire because both the taxes withheld from their pay and the taxes you pay fund that program.
  31. Paying the nanny tax shows your nanny that you respect their profession.
  32. Among nanny circles, you will be seen as a good employer.
  33. You will give your nanny an advantage when they receive another job because theyll feel comfortable asking to be paid legally.
  34. Your family and your nanny will have a mutually respectful relationship.
  35. You wont make your nanny feel like their job isnt a real job because you're handling it the same way a big business would.
  36. Filling out tax forms will become easy for you - or you'll find someone you trust and can depend on.
  37. You'll be able to explain why a nanny is classified as an employee, not an independent contractor.
  38. By telling your friends about nanny taxes, you might save some of them from some really big tax and legal headaches.
  39. You can call Care.com HomePay at 888-273-3356 to get a free consultation and answers to any nanny tax questions.
  40. You wont ever have the incredible stress and costly hassle of trying to fix this entirely preventable mistake.


Your Next Steps:

* The information contained in this article should not be used for any actual caregiver relationship without the advice and guidance of a professional advisor who is familiar with all the relevant facts. The information contained herein is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for your specific circumstances and may require consideration of other matters.

1 Comment

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Photo of Ruth C.

Ruth C.

Just in time for my taxes!
March 10, 2015 at 2:36 PM

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