According to the New York Times, an estimated 80 to 95 percent of American families that employ domestic workers, including nannies, are not compliant with state and federal tax laws. While there are a vast number of nannies that don’t object to or even prefer to be paid illegally, there are those who will not accept an off-the-books post. When you’ve found a post that seems to be ideal with the exception of the employers’ desire to pay under the table, approaching the issue frankly but respectfully may actually result in a favorable outcome; specifically one in which you get the job and are paid in compliance with tax laws.
Talk About the Advantages of Compliance
Navigating the complex regulations of nanny taxes can be a daunting prospect for employers, especially if they don’t see the benefits of doing so. Pointing out the ways that paying you in a legal, tax-compliant manner may be delicate work, but it can also pay off in the form of a high-quality post with a legal salary.
By paying you legally, your employers are eligible for tax breaks like a Dependent Care Account, and the federal Child and Dependent Care Tax Credit. They can also save money by making non-taxable contributions to your health insurance premiums, which they would not be able to do without filing as an employer. Furthermore, parents that pay their nannies legally are able to rest assured that they will never find themselves mired in a tax-related scandal as a result of evading nanny taxes; for affluent or high-profile employers, this can be especially important. Many political figures have taken a hit to the reputation over the years when revelations of tax evasion in relation to their nannies’ salaries came to light.
By taking advantage of all available tax credits and advantages, your employer’s added expenses may be as little as four percent of your annual salary. Many agencies and even do-it-yourself software programs exist to simplify the process as much as possible, making it less of a hassle than many employers realize to remain tax-compliant and on the right side of the law.
In addition to the ways that tax compliance benefits your employer, there are also significant benefits to you that may help to sway their opinion. Nannies that are paid legally and in compliance with tax codes are eligible for disability insurance and workers’ compensation benefits in the event of an injury or illness, unemployment benefits should their employers be forced to lay them off and can also draw Social Security benefits when they’re no longer able to work. Nannies who haven’t made contributions to Social Security are not eligible for these benefits, which can leave them utterly without income when advanced age renders them incapable of performing their duties. By simply paying your salary and the resulting taxes legally, your employer can ensure that you are always eligible for such benefits in the future.
Discuss the Risks of Tax Evasion
The red tape and piles of paperwork may seem never-ending when your employer is tax-compliant, but those headaches are nothing in comparison to the nightmare that being caught red-handed evading taxes would be. Nannies are typically only responsible for paying back taxes in the event of discovery; their employers may suffer a much more demeaning and disastrous fate. In addition to payroll taxes, non-compliant employers that have been discovered may also be responsible for interest and penalties that can be financially devastating; furthermore, they may even face up to $250,000 and five years of prison time. Reputations and, by extension, careers, may be permanently destroyed and there is no statute of limitations for failure to pay employment taxes. At any time in the distant future, your employers’ refusal to be compliant could come back to haunt them. For parents who find the paperwork overwhelming, there are payroll and tax service providers like Breedlove & Associates, HomeWork Solutions and GTM Payroll Services that specialize in nanny tax and payroll and can do all of the work for them.
Though the penalties may not be quite as stiff for nannies, there are still serious disadvantages that childcare providers who choose not to pay the proper taxes can face; namely, the loss of benefits and a history of employment that’s essential for securing a line of credit to purchase a home, vehicle or even to rent in most cases. You will not be eligible for unemployment benefits should your employer lay you off, and applying for those benefits anyway is the fastest way to ensure that both you and your employer are caught. Social Security retirement benefits and Medicare are also very likely to be out of reach for you, leaving you without income or health coverage when you’ve aged past the point of employment.
Reputable nanny agencies will almost always insist that any nannies they refer are paid in compliance with tax laws, but you must be able to confidently broach the subject if you’re seeking employment independent of an agency or if an agency provided incorrect information to the parents. Remember to keep your tone respectful and reasonable and discuss the issue in a matter-of-fact and unemotional manner.
Taken From Nanny Jobs
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