Nanny Tax Compliance Goes Way Beyond Payroll and Tax Filings

When families make the decision to hire a caregiver (for a child or dependent adult), handling the “nanny tax” obligations correctly are important for both the family and the caregiver. However, tax withholding and wage reporting are only part of the compliance puzzle. If your clients are not handling the labor law requirements correctly, they may be putting themselves at serious risk of a wage dispute – or worse.

Here’s a quick checklist of labor law issues that California families need to address:
 

  • Wage Notice – At the time of hire, families must complete a wage notice that includes details related to the caregiver’s pay, information about the workers’ compensation insurance policy the family has obtained, and a few pieces of personal information.
     
  • Workers’ Compensation – The state of California requires families to carry workers’ comp in case their caregiver is sick or injured on the job.  If the employee works less than 20 hours per week, they will likely be covered under their homeowner’s/renter’s umbrella insurance policy.  However, if the worker exceeds those hours, a workers’ comp rider needs to be added. Since workers’ comp covers medical expenses and lost wages in the event of a work-related injury or illness, this coverage is absolutely critical for risk mitigation.
     
  • Overtime – Families need to pay attention to not only the number of hours their caregiver works for the week, but also the number of hours they work per day. Caregivers are considered “personal attendants” and are due overtime for all hours worked over 9 in a day and, under federal law, 40 in a week.
     
  • Paid Sick Time – Household employees are required to have at least 24 hours of paid sick time each year. Several cities in California go above this requirement, but it’s another factor that families must plan for, track and manage for their caregiver.


These complexities make it paramount for families to consult with an expert during the hiring process. Household employment isn’t something that can be taken care of during tax season. It requires year-round management, which is what HomePay has done for families for more than 25 years.

If you have a client juggling the responsibilities of managing care for a loved one, let’s work together to make sure the process is as easy as possible for them while minimizing the risk of a mistake. Send us an email and we’ll give you more information about how our service works and how we can help.