October 11, 2012
We're proud to be members and supporters of APNA, the Association of Premier Nanny Agencies (www.theapna.org). APNA is an alliance of many of the best full-service staffing agencies in the U.S. -- boutique, high-quality firms who work extremely hard for families and nannies. They come together on their own nickel to create standards (in an unregulated industry) and share ideas and best practices for the betterment of the in-home care industry and the well-being of our children. It's an inspiring group and we can't wait to get to DC for the annual conference!
September 20, 2012
Next week is the official appreciation week for the unsung heroes of our society -- nannies. If you have a caregiver, make sure she knows how much you appreciate the way she nurtures, teaches, inspires, and protects your loved ones. It doesn't have to be something lavish or expensive -- just make sure she feels the love!
Beyond Nanny Appeciation Week, one of the best things a family can do for their nanny is to make sure she is paid professionally -- so that she has all the protections and benefits that other professionals enjoy (i.e. retirement income through Social Security, retirement medical insurance through Medicare, unemployment benefits, etc.). Handling payroll correctly is not as expensive or as difficult as many people think and goes a long way toward creating a successful employment relationship.
September 11, 2012
Since we became household employers and started Breedlove & Associates back in 1992, the question of worker classification has come up almost every single day in one form or another -- Is she my employee or an independent contractor? Can't I just give her a Form 1099 at year end? If she agrees to be an independent contractor, is it legal?
Unfortunately, a lot of the answers floating around on parent forums and other websites are flat out wrong -- and lead families into expensive mistakes. We feel like it's our job to share the correct information so families don't get blindsided by legal problems. So, here's what you need to know.
The IRS has a 20-point test to determine worker classification. In virtually all cases, the IRS has ruled that domestic workers (i.e. nannies, housekeepers, senior caregivers, personal assistants, chefs, estate managers, etc.) are employees of the families for whom they work. It doesn't matter what the contract says or what the worker calls herself, the family is legally considered the employer and, therefore, they are subject to household labor laws and the "nanny tax" obligations.
Why does the IRS care? It's all about tax dollars and funding the programs that provide worker benefits and protections. Employers are required to match the employee's Social Security and Medicare taxes as well as pitch in to the state and federal unemployment pools that fund unemployment benefits. Without these contributions, workers find themselves without retirement income, health insurance during retirement or temporary income in the event of a layoff.
For these reasons, the IRS and the Department of Labor have teamed up recently to begin an unprecedented effort to crack down on worker misclassification. It's simply not worth the tax evasion charges -- and corresponding fines, back taxes and interest.
If you have any questions about worker classsification, please don't hesitate to give us a call. We're here to help.
August 28, 2012
Every year, we talk to a lot of household employers who are facing expensive tax and legal problems for failure to handle the "nanny taxes" correctly. The vast majority of those problems are easy to avoid -- if you address payroll at the time of hire. Unfortunately, many families wrongly assume they can just hand it over to their tax professional next April.
What's the problem with that approach? While it is legally permissible to remit the federal household employment taxes with your income tax return next April, there are state filing requirements that cannot be put off until next April. Most states require that employment tax returns be filed quarterly -- and some have monthly requirements. Waiting until next April will trigger late filing penalties and interest charges from your state. (In addition, you may incur underpayment penalties on the federal taxes if the amount owed takes you out of the IRS "safe harbor").
Finally, there are important labor law requirements that, if not handled correctly from the outset, can create liabilities for families. That's why we take the time to guide families through things like Form I-9, workers' compensation insurance, disability insurance, overtime and other state-specific requirements.
Give us a call and let our New Employer Orientation team help you make a problem-free, stress-free hire. When it comes to the tax and legal aspects of being a household employer, an ounce of prevention is definitely worth a pound of cure.
August 7, 2012
Have a nanny and a company? If so, you may be tempted to pay your nanny through your business payroll. Why not?...payroll is payroll, right?
Well, the IRS sees it differently. All employees paid through companies must be "direct contributors to the success of the business" because businesses are entitled to tax deductions on payroll expense. If you pay a personal employee through the company, the payroll expense will be inflated by someone who is not a "direct contributor" and, therefore, the company will be guilty of taking an illegal tax deduction.
Additionally, businesses (except for Sole Proprietorships and For-Profit Farms) are not allowed to report household employee payroll or remit household employee taxes as part of their employment tax process. There is a separate process for household employment, with different forms and deadlines.
August 3, 2012
After 20 years of helping families through the nanny employment process, we've found that there's an almost universal misperception that the employer taxes (a.k.a. the "nanny taxes") will add significant costs and make hiring a nanny unaffordable. The fact is most families are entitled to one or more childcare tax breaks that can offset the vast majority of the employer tax cost. Some families -- especially those with short-term or part-time care -- will realize tax savings that far outweigh their nanny tax obligations.
To help families who are hiring a caregiver budget for employer taxes -- and the accompanying childcare tax breaks -- we have created a free Nanny Tax Calculator. All you need to do is plug in the weekly pay, what state you live in, whether you or your spouse have access to a Flexible Spending Account and how many children you have under age 13. Chances are, you'll be pleasantly surprised at the cost.
Using this free tool early in the hiring process will help you budget properly so you can focus your nanny search on candidates in your price range. If you're in the hiring process, good luck! And please call us if you have any questions about tax breaks or any other tax or legal aspect of being a household employer.
July 23, 2012
Following passage of the New York Domestic Workers' Bill of Rights legislation, many families who employ household workers (i.e. nannies, housekeepers, senior caregivers, personal assistants, etc.) have been hit with expensive fines from the state for failure to obtain the proper insurance.
Here's the law in New York: if you employ someone to work in your home and the employee a) works 40 or more hours per week, b) is a live-in employee or c) is professionally certified, the family is required to obtain two policies -- Workers' Compensation insurance and Disability insurance.
To avoid these fines, families must setup employer tax accounts and then apply for the policies. The least expensive way to obtain Workers' Compensation and Disability insurance policies is to buy them directly from the state. Since the tax accounts and the insurance applications must be handled sequentially and there are big fines for each day without coverage, we help our New York clients through this process at no extra charge. We manage it as part of the initial setup with our service so busy families have one less thing to worry about.
July 17, 2012
If you pay a domestic worker (i.e. nanny, housekeeper, senior caregiver, etc.) $1,800 or more in a calendar year, you are required to withhold Social Security and Medicare taxes (currently 4.2% and 1.45%, respectively) from your employee's pay. Collectively, these taxes are known as "FICA." Employers who fail to withhold the FICA taxes are responsible for paying them for their employee.
For more information about the "nanny tax" withholding requirements, visit our Expert Advice page/video: http://bit.ly/O8LiRo
July 13, 2012
For families who had a household employee (i.e. nanny, senior caregiver, personal assistant, housekeeper, etc.) in the second quarter of 2012 (April-June), your state requires you to file employment tax returns and remit employee and employer taxes. In most states, the deadline is the end of July.
Taking care of this, and other "nanny tax" obligations, helps your employee obtain critical benefits, such as social security, medicare, unemployment, disability and the ability to qualify for loans/credit. In addition, compliance eliminates financial and legal risk for the family -- as failure to handle these requirements is considered tax evasion.
If you need help with your "nanny tax" filing, let us know. Our No-Work, No-Worry household payroll service was built just for families and makes the whole process effortless.
June 22, 2012
In the United States, more babies are born in the summer than any other season. Why is that important? Because if you've just had or are about to have a baby and you anticipate childcare expenses in 2012, this tip may save you as much as $1,700.
If you or your spouse have access to a Flexible Spending Account ("FSA") at your office, you'll be able to pay for up to $5,000 of childcare expenses using pre-tax dollars. That means you'll pay no income taxes or Social Security or Medicare taxes on that portion of your income. That'll save you $2,000 to $2,300 per year, depending on your marginal tax rate.
Unfortunately, FSAs only allow enrollment once a year. If you're not already enrolled for 2012, you'll have to wait until 2013 -- unless you've just had a "life-changing event" (i.e. the birth of a child). If so, you have a 30-day window after the birth of your child to enroll.
If you miss the window or don't have acces to an FSA, you can still capitalize on the Child and Dependent Care Tax Credit. If you have one child, it'll save you up to $600 per year; if you have 2 or more children, you'll save up to $1,200 per year. For more information, visit our Expert Advice page.