Attn: Nannies/Caretakers; Tax Question?

i used to do child care and for the first year i never paid taxes then i started working and got my taxes done at h&r block thank god for them because i was supposed to pay taxes on what i made. the irs let me make payments so make sure you have someone professional do your taxes. when i did it it was not that much maybe 300.00,so ever since then i always went there.hope this helped?

Hi M.,

I read a few of the posts regarding taxes and was informed about the nanny tax. The couple I am employed by had mentioned they would do a 1099 during the interview, but I thougt nothing of it. It wasn't until a few months into the position I realized I should only be paying half. Some people choose to do straight cash/check and not declare it, but this of course is illegal. I contacted someone through e-mail and the following was her response:

If you are working as a nanny you are an employee of the family who has hired you - you are NOT an independent contractor. The IRS has ruled that people who hire a nanny
are employers - they control your work hours and what you do while you are working. You should be given a W2 at the end of the year, not a 1099 since you are not an independent contractor (that's who gets a 1099). The family should be
withholding Social Security and Medicare taxes from your pay and they also need to match that amount and pay federal and state unemployment taxes. Independent contractors have to pay both halves of the Social Security and Medicare taxes so it is more expensive for them when they file their income tax return.

You can also ask the family to withhold federal and state income taxes, but you are not required to do so. If you do not have the income taxes withheld during the year, you are responsible for making the payments to the IRS and the state
either by making quarterly estimated tax payments or paying the tax when you file your income tax returns (if you do this and do not have any money paid during the year, you may be subject to interest and penalty for not having any money paid to the government during the year).

Also, I believe if at the year's end you have paid an individual over $1500 dollars then they need a W2. Otherwise, if they baby-sit on occassion (babysitters,not nannies), cash is fine. I hope this helps.

We went through this with our sitter. We pay her from a Dependent Care Assistance Account (pre-tax for us) so it's traceable to her. She didn't realize this when she agreed, and was a little upset when she discovered that she would have to report it. You can deal in cash under the table, but paying the taxes is the ethical thing to do. And if your employer wants any tax breaks for paying for childcare, you may have to come up with an arrangement that is agreeable to both of you.

I'm not a nanny, but employ one so have gone through all this tax stuff. Legally, your employer is supposed to give you a W-2 and do Social Security and Medicare withholdings (their part is 7.65% with yours being an equal 7.65%, unless they decide to cover the entire 15.3% of your income) if you make more than $1500/year. Your taxable income is then just your income tax rate as applied to your income. Cash or check does not matter, as you are being paid a wage and legally therefore supposed to report it. Obviously, harder to trace cash if you do not want to claim it (taking a risk since it is not legal), but that is something you should definitely discuss with your employer since they could be claiming what they pay you for both flex spending accounts and for the dependent care credit on their own taxes. If that is the case, then they have to report how much and to whom they are paying childcare and provide your SSN. So make sure you are on the same page about how you're being paid, how they are filing taxes, what you need to report, etc.

If you're paid less than $1500 this year (starting in Oct, it's possible?) then there is no SS or medicare that needs to be paid, however your income is still taxable if you make more than $1200 total from all employment in a year and legally should be reported.

Here is a link to the IRS document on how household employees (including nannies) are supposed to be paid and reported:

http://www.irs.gov/pub/irs-pdf/p926.pdf

I am a family daycare provider and to make it easier my husband has his work take out extra taxes from his check each week. This way we do not have a big tax bill at the end of the year.
You need to claim everything you make even if it is paid in cash.
If you are going to care for the child in your home you should see if there's any write offs for using your home. I know we have write offs, but I am licensed by DCFS. I do not know if that matters. Also, try Red Leaf Press on the internet. They have all kinds of information that may help.
Cheryl