The Top 11 Professions Most at Risk if Not Paying Nanny Taxes

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Although everyone stands to lose something by not filing nanny taxes correctly, certain professions are more at risk if errors are made or taxes are skipped all together.

Bernie Kerik, the former New York City Police Commissioner who was convicted of nanny tax fraud, suffered professional disgrace and the resulting public ridicule by failing to pay nanny taxes. As a top law enforcement boss, many wondered why he so flagrantly broke the law he was trusted to uphold.

"For me, everyone who hires a nanny has something to lose if they do not follow the law," said Tom Breedlove, Sr. Director of Care.com HomePay. "But those with professional licenses have extra issues as they could lose their livelihood as well as their professional license."

Although Kerik's case was very public, Breedlove assures that most people don't go to jail for not paying nanny taxes. But they can get tangled in a legal and financial mess.

Do people set out to commit tax fraud when they pay a nanny under the table? No, not most, says Breedlove. The majority just don't realize the tax and legal ramifications when forking over the cash. Paying a nanny without reporting the full income (or even doing it incorrectly) is considered felony tax evasion and can jeopardize your career. In the end, your nanny actually loses money because when she goes to collect retirement or even unemployment benefits, her income is underreported and she cannot claim money and benefits that should be hers.

The following list includes 11 careers that demand the utmost integrity by professionals who risk the earning potential that comes with loss of professional license or loss of public trust.

  1. Lawyers
    The rule is, if you live by the law at work, it's assumed you know to live by the law at home, too. And unfortunately, not paying taxes properly could strip you of your right to practice law.

  2. Judges
    The same rules for lawyers apply to judges, but judges have the added burden of evaluating others accused of wrongdoing. Even without a conviction, making the wrong choice in your own life casts doubt on how well you can do your job.

  3. Financial Advisors
    Your clients depend on you to know what to do with their own money and keep them out of tax trouble. If you are not paying taxes properly, they will not trust you with their own money.

  4. Financial Planners
    If you are in the profession, it is assumed you are extra careful with money and taxes. If you are not, clients might not give you a second chance.

  5. Certified Public Accountants
    If you have any type of professional license, it could get revoked if you are convicted of tax evasion or conspiracy to commit tax fraud with another party (your nanny), which is a felony charge.

  6. Insurance Professionals
    Sorry to sound like a parrot, but it's all about protecting that license! Even if there is no conviction, being charged with a felony can create huge professional headaches.

  7. Doctors and Dentists
    If convicted of tax fraud, guess what could get suspended? Your license. And for these professions, where patients put so much trust in your judgment, your reputation may suffer damage beyond repair.

  8. Licensed Therapists
    Not only could a tax evasion charge put your license in jeopardy and a conviction take it away, if you have your own practice, it can also impact your other employees. They could be out of a job if the practice folds.

  9. Politicians
    Maybe this is the most obvious one, but considering those who still get caught, maybe not. Politicians are subject to extra scrutiny because the public wants to know if they will act appropriately when representing the people who voted them into office.

  10. Top Law Enforcement Officials
    People in positions of prominence or public trust, said Breedlove, are vulnerable to extra scrutiny. One misstep could be a career-ender. "These professionals must be especially careful," said Breedlove.

  11. Media Spokespeople
    In the highly competitive world of media jobs, those who report the news or who are media spokespeople need to have a clean background. For better or worse, rivals love to dig up questionable actions, especially those that could end a career. Paying your taxes keeps your life off the lead news.

How to Get Above Board

If you've had wages in the past that were paid under the table, the most honest and ethical thing to do is to file delinquent tax returns. The best thing, said Breedlove, is to try to make it right. Yes, you will end up paying back taxes, but many states will waive penalties if they know you are correcting your errors in good faith. And moving forward, check out our Nanny Tax Calculator to see your new pay rate and what a nanny's take-home pay would be (be sure to factor in your childcare tax breaks if you're eligible). Then learn what forms you will both need to fill out to get the process started.

Your Next Steps:

* 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 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.

For more tips and advice, check out these Nanny Tax Articles.

9 Comments

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Bobby

Hi, I am trying to get a babysitter come to our house for 2-3 hours, 3 times a day. Can anyone guide me through the right amount of money to pay them. I need babysitter for a month only? Do i need to fill any additional paper work. Can pay them cash or check? What are my other responsibilities towards my babysitter besides paying them ? Sorry totally new to this so need help. Thanks
July 24, 2016 at 2:00 PM
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Lisa

I'm the CareGiver. My employer has strung me along for almost 2 years. We have started the process of paying all the back federal and state taxes. Since there may be disability back taxes paid, can a claim be made retroactively as well? I shattered my leg in November (going to work 7 hours early) and was out of work/reduced hours for months. You guys have been AWESOME on the phone: huge thanks! I thought the public would be interested in this question
April 22, 2016 at 12:22 PM
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Tom B.

Hey Hannah. I'm Tom Breedlove, Director of Care.com HomePay and I'll be happy to answer your question. The "employee" designation comes from who has control of the working relationship. If you're telling the caregiver when to come to your home, what hours to work, how the childcare is to be performed, etc., the IRS is most likely going to consider this person to be your employee.
February 09, 2015 at 10:57 AM
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Hannah

What the person who cared for my child fall under self employed or employee if they brought over to my home another child whom they are getting paid to watch fall under?
February 07, 2015 at 10:47 AM
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Stephanie Breedlove

Hi Shirley! Since it seems you were paid under the table, there are a couple of options available to you. The first is to work with the family so they can appropriately issue you a W-2. They'll be late getting the W-2 to you because the deadline is January 31, but it should still be done. The Social Security & Medicare (FICA) taxes that were not withheld from your pay will need to be accounted for by the family (and perhaps you as well) in order for your W-2 to be accurate. If the family does not wish to provide a W-2, you may file your taxes using IRS Form 4852 which is a substitute form the IRS accepts. However, be aware that the IRS may audit the family when you file this form because they will want to gather more information about why taxes were not withheld in your situation. Obviously the first option would be the best scenario for both you and the family. I hope you get everything worked out soon Shirley!
January 31, 2014 at 4:53 PM
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Shirley J.

Hi, I started working for this family in February 11, 2013 and I have been paid direct deposit in my bank account. My employers didn't pay any taxes for me. I'm going to finish my contract this Feb. 28, 2014. What shall I do so I can file my taxes?
January 30, 2014 at 8:54 PM
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Sandra R.

Hi I been working for a wonderful family, started in March, and they did provide me with my w2 my daughter is also doing Nanny work but her employer told her she would not be getting one. They have been paying her with personal checks. What can she do
February 05, 2013 at 3:59 PM
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Stephanie Breedlove

Hi Jessica, If the family paid you $1,800 or more during 2012, they need to provide you with a Form W-2 and follow the "nanny tax" compliance process: http://www.breedlove.com/Answers/ExpertAdvice/ComplianceChecklist.aspx You'll then use the W-2 to prepare your income tax return. If they paid you less than $1,800 during the year, then they are not required to give you a W-2. In that case, you'd simply write in the total amount you made in unreported wages on line 7 of your income tax return, followed by the letters "HSH" (the code for household employment). If you or your family have any questions, feel free to call us at 888-273-3356.
January 24, 2013 at 5:27 PM
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Jessica K.

i have worked on and off for a family thru care.com in 2012. how would i claim that on my taxes and how would that family claim. what forms do they or i need?
January 24, 2013 at 11:07 AM

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