Having the Money Talk with Your Employer

You just found your perfect job. The family’s expectations of you line up with the way you prefer to work and you get along with them. There’s only one small hiccup—you want the benefits that come with professional pay, but they’ve never paid employer taxes before and aren’t sure if they want or can afford to. So how do you go about convincing them to pay you professionally?

1. Explain the benefits of legal pay

Taxes withheld from your pay make it easier to qualify for the short-term and long-term benefits other workers enjoy—such as Social Security & Medicare benefits when you retire, unemployment insurance, access to healthcare subsidies and a verifiable employment history that’s required for obtaining loans and credit. Professional pay also protects both you and your employer if you get audited.

2. Offer resources to help

One of the main reasons families don’t pay nanny taxes is because they’re not tax and payroll experts and don’t know what to do. You can help ease their worry by sharing information with them about nanny taxes and even what specific requirements they’ll have in the state you live in. And if they’re worried about the work involved, let them know that Care.com® HomePay, provided by Breedlove can handle the entire process for them— and provide a complimentary consultation.

Families also may have concerns about the cost of paying legally. If so, they’ll probably be pleasantly surprised to learn that tax breaks can sometimes offset most, if not all, of their employer tax costs. Our Employer Budget Calculator will help them see that nanny taxes may cost less than they think.

3. Talk about what your pay should look like

Professional pay is based on “gross wages” (before taxes) rather than “net pay” (after taxes). If a family is offering you a given net pay, you can simply convert that to a gross amount using our Employee Paycheck Calculator. For example, if you’d like a “take-home” pay of $500 a week, you may ask for a gross wage of $616. (The gross wage is dependent on your income tax withholding elections). Here’s an example you can use:

Gross Wage:

$616.00

Social Security & Medicare

$47.12

Income Tax

$68.72

Total Tax Withholdings

$115.84

NET PAY

$500.16

 
* The tax information contained in this article should not be used for any actual nanny relationship without the advice and guidance of a professional tax adviser 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.

37 Comments

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Cherry B.

Does it means also that once the employer Withold federal and state tax, the unemployment is also covered?
May 02, 2015 at 7:27 AM
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Cherry B.

Hi. I would like to ask how much will i federal and state tax be for income of $400 a week. I live in New York. How much will be my take home pay? Thanks
May 02, 2015 at 6:49 AM
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Valerie H.

Hello! What is the cost of using the HomePay service? Please answer for both the caregiver and the employer. Thanks!
February 28, 2015 at 10:05 AM
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Tom B.

Hello Beth. Care.com does not generate W2s for employees online, but HomePay does. Ask your employer if they use HomePay to handle your payroll and taxes. If the answer is yes, your employer can download your W-2 from our site at www.myhomepay.com.
February 18, 2015 at 6:25 PM
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Tom B.

Hey Kathie. Since I don't know what state you live in, I can't determine how much of your compensation can be deducted for room & board and thus how much you're really earning per hour. Based on the hours you mentioned, you're at $8.75 per hour, which is above federal minimum wage, but also assuming you're working literally around the clock. As a live in employee, you're only required to be paid for the hours you're performing duties, so I tend to believe you're being paid for less than the 120 hours you mention. If you're concerned about your compensation, this is a conversation you should have with the family. As long as the law is being followed, it's really up to you and them as to what merits a raise.
February 18, 2015 at 12:55 PM
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Beth O.

I know that the employer is required to give the employee their W-2 form by January 31. I asked my employer for my W-2 form on the second week of February and he said it was online and I can download it from my account on care.com. Could you tell me exactly where I can download it from? I have been searching everywhere on the site and cannot find it. I thought it would be easier to find! My accountant has asked for it so he can do my taxes as soon as possible.
February 16, 2015 at 1:00 AM
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Kathie W.

to add to my last comment, I pay my own taxes.
February 12, 2015 at 2:04 PM
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Kathie W.

Currently, I have worked for the same family for over two years. I am paid $1050. weekly for 120 hours work. I asked for a raise, and they say that I am not taking into account room and board. I do not understand. I work from Saturday morning at 9 until Thursday morning at 9, then I leave for two full days. In all reality, what should I really be getting paid. I do not want to make this mistake again. Thank you for your help. Kathie
February 12, 2015 at 2:03 PM
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Tom B.

Hey Jamie. Unless you live in Alaska or New Jersey, unemployment insurance taxes will not be withheld from your pay. Only employers are required to pay these taxes. Instead, you should have Social Security & Medicare taxes withheld and I would suggest having federal and state income taxes withheld as well so you don't have to pay these on your own.
January 13, 2015 at 12:53 PM
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Jamie T.

Hello. I have a question. My employers are withholding SS, MEDICARE, and UNEMPLOYMENT as well. I keep reading that their only supposed to take out SS and MEDICARE. am I supposed to be paying for unemployment myself?
January 12, 2015 at 12:02 PM
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Tom B.

Hello Karen. Yes, you are correct. The family will need to pay you overtime for all hours worked over 40 in a 7-day workweek. The state of Pennsylvania doesn't have any additional overtime laws outside of this mandate. If you or the family has any questions about other tax or labor laws, feel free to visit the HomePay website as we have information specific to workers and families in Pennsylvania. (http://www.myhomepay.com/Answers/State-Nanny-Tax/PA/Overview)
December 08, 2014 at 5:54 PM
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Tom B.

Hey Quintina. If you're providing caregiving duties as a true independent contractor, the family doesn't cover any taxes. You're essentially running your own business and the family is paying you a fee for your services. However, when you're looking for work on Care.com, in almost all cases, you'll be privately hired by the family and will be considered their employee. In that case, the family will withhold Social Security & Medicare taxes from your wages as well as federal and state income taxes (if you live in a state with income taxes).
December 08, 2014 at 5:47 PM
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Tom B.

Hello Heather. The scenario you described definitely isn't ideal. The reason is because the IRS does not have a way for an employee to pay their FICA taxes (Social Security & Medicare). You are allowed to pay your income taxes if the family wishes to not withhold them and you can do that by making estimated tax payments 4 times throughout the year so you don't have to make 1 large payment as you described. Unfortunately if the family is completely unwilling to go through the required tax withholding process, the only way for you to account for your wages is for you to file a substitute W-2 form which essentially outs the family to the IRS. It absolves you of liability because you're showing a willingness to pay the taxes and the IRS may ask you for the FICA taxes at that time. So as I mentioned, it's not the ideal way to handle things, but technically it can be done. I sincerely hope you and the family can work something out so that you don't have to resort to the measures I described.
December 08, 2014 at 5:44 PM
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Karen P.

What about overtime pay? I may be starting a position that would require me to work 50 hours a week for the first 2 months and then 55 hours a week thereafter. Are my employers liable to pay me time and a half after 40 hours of work for the week? It will be in the state of Pennsylvania. Thank you in advance for your help!
December 07, 2014 at 5:51 PM
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Quintina J.

I am an independent contractor through a referral agency. From my understanding I will be required to pay the 15.3% for my taxes. If a family through care .com does not want to cover the social security and Medicaid, what is my percentage that I need to withhold to make sure I'm taking out the right amount of taxes? Will it still be the 15.3% or another amount?
December 04, 2014 at 4:04 AM
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Heather K.

What if the employer refuses to have witholding of taxes setup? Would I just be paying a huge chunk when I file next year and tell the IRS how much I made?
December 03, 2014 at 9:18 PM
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Tom B.

Hello Mary. The fees for using Care.com are different than the fees for using HomePay. Often times, families will pay for a Premium Membership on Care.com to find a caregiver and then sign up with HomePay to handle their household employment payroll and taxes. For your particular employment situation, the family is going to be required to withhold and pay taxes because they'll end up exceeding the $1,900 threshold after 10 - 14 weeks based on the information you provided. Since the family doesn't want to be bothered with all this work, please have them call HomePay at 888-273-3356. We'll be happy to do all the work for them and make sure your payroll and taxes are handled in the correct manner.
October 29, 2014 at 11:39 AM
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Mary F.

I am totally confused. this potential family pays a flat 15.00/hr for 3 or maybe 4 hrs 3 times a week. They don't want to be bothered with tax with holding. when families or individuals sign up with your company, do they pay a fee? or is your company a way to bring care givers and families together ( a referral service?)/ I do pay for a premium membership. The hassles regarding tax with holding are troublesome to me, I always do the right thing. I don't need q any tax surprises. I am receiving SSI and am physically only able to work a small amount of hours per week. I do have a tax lady, and a financial planner. I need to know what to do ASAP. I want and need to work.
October 28, 2014 at 9:00 PM
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Tom B.

Hey Camille, great question. Even though you'll earn less than $1,900 from the family this year, you should still claim it on your personal income tax return. You'll write the amount on Line 7 of your 1040 with the letters "HSH" to designate household employment income.
October 27, 2014 at 12:21 PM
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Camille M.

I'm working for a family for less than one school year, oct 2014-june 2015. the take home pay is less than $1,900 for what i'm earning for this calendar year. Does that mean I don't need to file for taxes on it for this year? Next calendar year I'll be earning more than $1,900 so I'll need to start paying taxes then, but is it legal for me to not file taxes for what I'm earning this year?
October 22, 2014 at 2:31 AM

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