Would You Pay the Nanny Tax?

I do not agree with the Nanny tax. Many people can barely afford ONE night out away from their children. Many people HAVE to work and they HAVE to hire a babysitter. If a tax was forced on top of what they already pay out, and if the babysitter had to pay a tax on the small amount he or she makes from child care, it would be an impossible situation. A nanny tax is not fair or right.

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I'm in the 225,000 that pay the nanny tax. My husband and I are both lawyers, so we really can't claim ignorance. Or poverty.

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Cearralyn, the nanny tax only applies to full-time or permanent part-time nannies, not occasional sitters. And actually some nannies would prefer the nanny tax, because it entitles them to social security, unemployment and worker's comp benefits. Some nannies would say it's "unfair" if a household employer denies them access to those benefits.

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We have a different, but legal, arrangement. My nanny knows she is responsible to pay tax and that we will file a form with the government for full disclosure.

Most of the nannies I interviewed offered that they would "willing" to be paid under the table, and some stated that would be their preference. But I am not interested in breaking the law. I don't mind taking a "position" that I could explain to the IRS, but I won't fudge numbers.

Our maids, on the other hand, are on their own honor as far as paying taxes. They only come once a month, and my share of their earnings is less than the minimum amount that has to be reported to the government by me. They are responsible to pay tax, but it is not up to me to make them do it.

I don't see why any of these people shouldn't have to file a tax return, same as me. They still wouldn't have to pay tax unless they make plenty of money. If they bring in that much, why should they earn it tax-free, when others at the same income level pay tax?

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I nannied for 10 years, mostly part time as a temp while going to school. I was sent out by an agency on an as needed basis to a different family every time. since my wages at the time were negligible, I did not report this income. However, I had two separate employers that were full time and long term, and those employers did things legally.

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It is incorrect to call this a "Nanny Tax." What you are discussing actually refers to income taxes. If a nanny is a W-2 employee of a family, then the family is responsible for paying a portion of the nanny's taxes and the nanny is responsible for paying a portion. If the nanny is a 1099 employee, then the nanny is responsible for paying all of the taxes. It's not something that imposed on just nannies. This is a tax that every employee pays or should pay.

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Yes I would. It is important for the nanny to receive social security, workmen's comp, and unemployment.

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As far as taxes are concerned, just because someone doesn't pay taxes, that doesn't mean someone else is going to pay more. Many more people SHOULD avoid taxes because it benefits everyone. The less money people pay in taxes, the more money there is for the economy. When your handyman or nanny or cleaning lady or gardener doesn't pay taxes, you don't have to pay that person as much money. Just because one person writes a check to the IRS, that doesn't mean that person is actually "paying" the taxes. Taxes are always paid by the customer through inflated prices or being directly charged for the tax. Higher income taxes for anyone (the rich, the poor, who ever) means higher prices for their services or for the product they are making.

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Some employers attempt to bypass their share of FICA and Medicare tax by reporting the child care income on a Form 1099, as non-employee compensation, leaving the care giver responsible for the entire amount of Medicare and Social Security tax.
However, the definition of self employment does not usually fit the test that determines self employmented vs employee in a child care situation when the person is the regular care giver.
The main rules determining nec payment vs wages, as I remember it from when I worked in I.R.S., was who set the hours, amount of payment, the conditions and whether there were other employers. There was much more than that,of course, but that is the gist of it.
Unfortunately, many full time care givers are not aware of those rules, and when notified by I.R.S., will just pay up, not only the taxes due, but interest and penalties, there being no way of I.R.S. knowing otherwise.
The difference being, of course, would be what portion of FICA and Medicare tax she/he would pay, as she/he would still be liable for the state and federal income tax, whether the employer withheld that or not.
The amount of federal tax withheld is dependent upon the numbers of dependents filled in by the employee on the Form W-4. That was, at the time I worked there, was not the employer's responsibility to verify those numbers.

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Incredible. A nanny is your employee and as such, the employer is bound by the laws of this country to pay Social security, medicare and usually state unemployment taxes. I don't understand the disconnect. You don't have to pay the occasional babysitter, but people who work are expected to pay taxes.

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It really is frustrating that this seems to always fall on the nanny's shoulders. Taxes were never discussed with me in the employment process, and, when I started the job, I didn't realize that it was any different from any other job. I've had to pay my taxes as someone who is self employed, and am quite nervous about having the discussion with my current and future employers about the responsibilites that they, as my employers, should be on top of.

"I work and I pay taxes. Why shouldn't everyone else?"
Don't blame the nannies is all that I can say. I know that I, personally, would much rather be paid legally, as I'm going to be paying my taxes at the end of the year. I just wish that the people who employ nannies would be more considerate of the fact that it is somewhat unfair to deprive their caregivers of their work benefits/make them figure out the taxes on their own and pay much more at the end of the year. (Thank goodness I'm a saver or I never could have handled the whopper amount of taxes I owed last year!)

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I found an affordable company online that does all my nanny taxes for me - they even had free set up! The cost is reasonable and saves me a lot of stress. Plus it is the law and I know my nanny appreciates it (she wouldn't be able to buy a house without established employment which I now provide for her). I recommend you do a search of the companies that do your nanny taxes for you - it's easy and relatively inexpensive

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As a full time nanny, I prefer to pay taxes. Many families are unwilling to pay, because they think that it will be too complicated or cost too much. They also often say that they can't pay as much, because they can't deduct what they pay you on their taxes. The truth is that there are several companies online (I've used breedlove-online.com for my past 2 families.) that do all of the work for the family. It requires quarterly fees of around $160, employer # set up of $75, and end-of-year prep forms of $75, which the family typically makes up after deducting Child Care Credits when they file. They can also deduct from dependent care or flex accounts.The IRS considers paying a household employee who makes over $1,700 annually "under the table" tax evasion, and can be charged back taxes, penalties, and interest. Also, the family can be charged with felony tax evasion, which can cause loss of professional license and even imprisonment. It's not fair to the nanny and not worth the risk. I refuse to work for a family who doesn't at least withhold employer taxes.

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