Would You Pay the Nanny Tax?

Filed under: Opinions

It's not unusual for parents to employ babysitters, nannies and other sorts of home care workers to assist them in raising their children, or at the very least watching them while they go out for dinner by themselves for a change. But, did you know that you're supposed to be paying taxes for the services those folks provide, and that they're suppose to pay them too? And, even if you did know that, are you doing it?

Most people don't know about the so-called "Nanny Tax," and those who do don't bother to pay it, even though it's technically illegal not to. Why not? Well, to put it bluntly, most people figure why should they if no one else is.

It is estimated that 80-90% of people cheat on the Nanny Tax. In 1997, over 310,000 tax returns were filed claiming the tax, a number that dropped to just over 225,000 in 2006. I doubt, and so does the IRS, that so few people are employing such help. If anything, with the number of families where both parents work out of the home increasing, it would seem reasonable that parents are using additional help more than ever.

Regardless of the state of the economy, paying for nannies and sitters is extremely expensive. Where I live to go out for two to three hours could cost $40-$60 on top of what we're already set to pay for dinner and a movie. If the tax were forced, employees would charge an even higher wage in order to make up for the losses, thereby making it impossible for many families to employ them in the first place.

I work and I pay taxes. Why shouldn't everyone else? It is fair that so much should have to come out of my paycheck and none out of someone else's? This is not to mention the difficulty of the forms. Immigration status, federal employee identification numbers (FEINs) and a host of other things are needed to complete the paperwork, things neither the employer nor employee may have or know about. All in all, the author of the New York Times article I read estimated it took a good twelve hours to get compliant, and would take another twelve each year to stay that way.

Do you think folks should have to pay taxes for nannies and other home care workers? What about the workers themselves?

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Start by teaching him that it is safe to do so.