The “Perfect Nanny” came to mind to inspire this post! My favorite line of that song is, “Rosy cheeks, no warts”.
Please Note: This was written before COVID-19. So if you’d like a little reprieve from COVID-19 talk…keep reading! Also note, filing and payment deadlines for payroll will be different while we navigate the aftermath of all this! Please be safe and stay healthy.
Having small children I understand the struggle to obtain and maintain quality childcare! My kids go to a wonderful little local school but I know many people who employ nannies.
This is a great option but parents need to be VERY aware of the dangers of fines and penalties for non-compliance with household employment laws.
Here are the 3 main issues with nanny taxes:
- Failing to pay minimum wage or overtime
- Poor timekeeping records
- Mistakes on payday
Beyond payroll taxes, there are other areas that could prove costly to parents. These include lack of Workers’ Compensation Insurance and ignoring household employment nuances.
So how can you properly follow household employee laws? Here are a few suggestions!
- Properly classify the worker as an employee
- Use Form I-9 for work eligibility
- Get workers’ compensation insurance
- Pay minimum wage and overtime
- Track employee’s hours
- Keep any business payroll separate from household
- Use Schedule H…not Form 941
Sound complicated? Yes, it is! Don’t go at it alone and risk getting it wrong. Make sure you partner with someone (wink, wink) who can help you navigate this and provide exceptional service to make your life easier.
Jordan Ilderton, CPA