As a household worker, you’ve got a very important job to do. Whether it’s caring for children, organizing a family’s busy schedule or keeping the house sparkling clean, your work directly affects the well-being of a family. And professional work deserves professional pay and benefits. Yes, that means taxes are involved, but with those taxes come several very important benefits for families and for you.
Take a look at what’s available to you just by having taxes withheld:
- Tangible employment history. When you’re paid on the books, it creates an employment history that you can prove to creditors. If you ever need a car loan, a mortgage, a student loan, a credit card, or if you simply want to move to a new apartment, you’ll be required to prove your income and your employment history. If you’re paid under the table, your employment isn’t documented and it’s as if you never officially held the job.
- Unemployment benefits. No one likes to think about losing or not having a job, but if a family moves or kids get too old for a nanny, you could lose your job due to no fault of your own. If you’re paid legally, you may be eligible to receive unemployment insurance benefits of approximately 50% of your salary for up to six months. This benefit is free to you because the family pays taxes toward the cost of the program.
- Health insurance subsidies. The Affordable Care Act requires that all individuals be covered by health insurance—either through your employer or by purchasing an individual policy. Depending on your income level and how many people are in your household, you may qualify for a subsidy to reduce the cost of your premiums. However, if you wish to qualify for a subsidy, you have to be paid on the books.
- Social Security & Medicare benefits. When you retire, you’ll receive money for living and medical expenses. How much you receive is based on how much is credited into your account with the Social Security Administration. When you’re paid as a professional, the Social Security & Medicare (FICA) taxes withheld from your pay are matched by your employer on a dollar-for-dollar basis. It’s estimated that workers earn $5 in retirement benefits for every $1 withheld from their pay during their working lifetimes.
These benefits can help both you and your employer in both the short and long-term. Being paid professionally is an investment in your financial future, and if you’re wondering how to get started, read our tips on how to have the “tax talk” with your employer.
