With very few exceptions, all working Americans are required to file a personal income tax return with the IRS before April 15th (or in October if you get an extension). And if you’re a nanny, in-home senior caregiver or other household employee, the IRS says you need a W-2 from the family you work for in order to file your tax return if you earned at least $2,300 from them during the calendar year.
But during tax season, we hear from many household employees who were paid under the table the previous year and want help paying their taxes and reporting their income. Sometimes, they reach out because they just realized that they’re supposed to have a W-2 to file their tax return. But other times they’re looking for advice because the family they work for doesn’t wish to pay them on the books. If you find yourself in this situation, here’s some advice on how to proceed and what you can do to comply with the IRS.
Emphasize to the family about the benefits you receive by paying taxes
“Sometimes families don’t understand the benefits you receive when you’re paid on the books,” says Eva MacCleery, Director of Care.com HomePay. “Once they see that depriving you of access to unemployment benefits, a provable employment history and credits with the Social Security Administration have tangible negative effects, it’s possible they will reverse course and opt to pay you legally.”
There will be work for the family to do to get their taxes straightened out and prepare a W-2 for you, but HomePay can take care of these tasks if the family isn’t prepared to do the work themselves.
If the family still won’t give you a W-2, you can contact the IRS for help
The deadline for the family to send you a W-2 is January 31st and if you get the sense that you won’t receive one, you can call the IRS. They will most likely ask you for personal information, including your Social Security number, information about the family and how long you’ve worked for them, and an estimate of how much you’ve earned and the taxes you’ve had withheld. The IRS will then send a notice to the family to let them know they need to send you a W-2.
File Form 4852 as a substitute for your W-2 if you never receive it
If you’re getting close to the April 15th tax filing deadline and nothing else has worked, you can report your income using Form 4852, which is a substitute for the W-2. In addition to reporting your income and paying the estimated amount of taxes you believe you owe, you must explain to the IRS how you tried to obtain a W-2 from the family. Filing Form 4852 significantly increases the chance that the family will be audited by the IRS, so keep this in mind in case you want to give them one last chance to reconsider paying you under the table.
While this conversation may seem daunting, it’s important to remember to look out for yourself. Just like the family is putting themselves at risk by not paying you on the books, you’re also putting yourself at risk if you never file a tax return. After all, you’re a professional caregiver with an important job to do, which is why taxes are required just like they are for every other working professional in the country.