| When a family with a new nanny begins to work | | | | paperwork. As with any legal or tax matter, there |
| out a new nanny pay schedule, the question of | | | | will be lots of papers to file, and hoops to jump |
| whether or not the nanny and family- the | | | | through. Not only on your end, but for the taxes |
| employer in this case, will be paying the so-called | | | | nanny pays as well. Families, as the 'employer' will |
| "Nanny Tax." While it is common knowledge that | | | | have to file for an Employer Identification Number. |
| the vast majority of babysitters and nannies are | | | | They will likely be required to furnish Workers' |
| paid 'under the table,' meaning they are paid in | | | | Compensation Coverage for the event in which |
| cash to avoid the many legal issues that come | | | | the nanny is harmed or injured on the job. Some |
| with legal payment, all families should know that it | | | | families will have to make quarterly payments, or |
| IS illegal not to both pay taxes, and withhold | | | | filings, depending on location, and all families will |
| taxes each year once the nanny pay rises above | | | | have to have excellent record keeping skills. |
| a certain benchmark. Although some nannies may | | | | One of the most challenging aspects of paying |
| agree to being paid illegally, families who feel | | | | the proper taxes nanny and other household |
| strongly about staying legal and paying the "Nanny | | | | employees qualify to pay is that most employees |
| Tax" should be insistent that the nanny comply. | | | | will not be thrilled about losing money each |
| Ultimately, both parties will feel better about not | | | | paycheck when taxes are withheld. This means |
| breaking the law, and the nanny will be eligible for | | | | the employer, or family, will likely be asked to up |
| services like social security, unemployment and | | | | the annual salary in order to compensate for this |
| workers' comp. The best way to make the | | | | loss. For families that are just barely budgeting in |
| situation comfortable for everyone is for both the | | | | their normal nanny pay, this can be a deal breaker |
| family and the nanny to know some of the | | | | when it comes to going 'legal.' Additionally, |
| troubles that might come up while preparing the | | | | managing all the extra paperwork can be |
| necessary paperwork. | | | | stressful. While there are agencies, or even web |
| The top issue and barrier to legal taxation that | | | | software for purchase that can alleviate the |
| many families may face is immigration status. | | | | workload, these services can be quite expensive. |
| Many illegal employees are drawn to household | | | | This is on top of the taxes the family is already |
| employment for the very reason that it generally | | | | paying (about 10% of the nanny's salary) and |
| provides a great opportunity to earn a top salary | | | | other fees like stat unemployment taxes, for |
| without involving immigration authorities. While this | | | | example. |
| may be a touchy issue between you and your | | | | The best way to prepare for paying the "Nanny |
| new nanny, if your family wants to legally employ | | | | Tax" is to budget in the full cost of hiring a nanny |
| the nanny it is important to ask the nanny | | | | the legal way right from the start. Each family has |
| questions about her immigration status. Be clear | | | | a personal choice to make as to whether it will |
| with the new nanny that you will have to affirm | | | | insist on maintaining a legal status with its new |
| her work eligibility by filling out something called an | | | | nanny. However, keep in mind that just because a |
| I-9 form. If the nanny is not comfortable with | | | | course of action is common, in this case paying |
| this, the family may have to choose a different | | | | the nanny illegally, won't stop the government |
| nanny. | | | | from punishing you years down the road should |
| Another top barrier to going fully legal with your | | | | anything go wrong! |
| nanny's tax status is often the amount of | | | | |