Writing and Implementing a Household Employee Work Agreement

household employee work agreementA household employee work agreement is a detailed outline of the employment engagement. It establishes a clear understanding between you, as the employer, and your employee regarding their duties and responsibilities and helps reduce the likelihood of issues and misunderstandings during their employment. A household employee work agreement will also set the tone of your working relationships with open and clear communications.

Follow these tips as you prepare your own household employee work agreement.

Writing a Household Employee Work Agreement

  • Take your time and thoughtfully consider what to include in the work agreement.
  • If you plan to use a standard work agreement template, customize it to suit your household’s specific needs.
  • Specify the nanny’s schedule, wages, benefits, and job responsibilities.
  • If there is a time frame for employment (i.e. temporary placement), include those dates in the agreement.
  • The agreement should be easy to read and understandable by all parties involved.
  • Consider including a confidentiality clause that extends during and after employment.

Implementing a Household Employee Work Agreement

  • Once completed, discuss the work agreement with the employee and answer any questions and concerns they may have.
  • If the employee expresses a concern that can’t be resolved, recommend that the employee seek their own legal counsel.
  • You and your employee should sign and date the agreement. Provide a copy to your employee and keep a signed copy in the employee’s file.
  • The agreement should be in place prior to the employee’s start date.
  • Send A New England Nanny a signed copy for our records.

We are here for advice and input into creating your work agreement. Contact us at (518) 348-0400 for more information.

Drug Use in the Workplace – Your Home

drug use in the workplaceMarijuana has been in the news a lot lately. In recent years, recreational use has become legal in Colorado, Washington, California, Massachusetts, Maine, Alaska, Nevada, Oregon, and Washington D.C. Plus more than twenty-five states allow marijuana use for medicinal purposes. Recent polls show, for the first time in history, that a majority of Americans would approve of complete legalization of marijuana. So what does all this mean for employers (including household employers), particularly those in states where recreational use is legal or may become legal?

The important thing to remember is that none of these laws require an employer to allow drug use in the workplace, or to tolerate employees who come to work under the influence. If you have a drug-free policy in place for your home, you are not required to alter it. Therefore, your nanny or other employee that violates this policy can still be disciplined or terminated, regardless of what the laws in New York are regarding marijuana legality.

The difficulty that may arise in an employer’s mind relates to what your employee does in their time away from your home, their workplace. If your nanny has a few drinks after work, you might not think twice about it. But if she smoked marijuana after work (if you lived in a state where it’s legal), would you have a different reaction?

This all comes down to your personal choices, and these issues should be discussed with a candidate prior to hiring. You have the right to implement a drug-free workplace policy. Included in the employee handbook, the policy needs to clearly state why the policy is being implemented—to ensure a safe and healthy workplace. Include consequences, such as immediate dismissal, but take care that these consequences are consistent with other existing personnel policies, and of course, any applicable laws.

In the drug-free workplace policy, an employer may want to include information on drug testing. While most private employers have the right to test for a wide variety of substances, federal, state, and local regulations may apply. However, according to the U.S. Department of Labor, employers who drug test without a drug-testing policy are exposed to liability. Employers may request that employees take a drug test after a job is offered and that employment is contingent upon a successful outcome. Local drug stores sell drug testing kits for about $20.

Again, just because marijuana is now legal in many places, you still have the right to enforce a drug-free environment for your workplace. If the laws change in New York, it may be prudent to make changes to your policy to clarify what you expect from your employee in terms of impairment, safety, marijuana use, and termination.

Contact us for more information at (518) 348-0400.

Planning for Summertime Child Care

planning for summertime child careSummer will be here before we know it! When schools begin to let out for the summer, many families find that they need to make changes to their child care arrangements. It’s not too early to seek advice on handling different issues that arise when planning for summer household employment, so let’s take a look at some of the most common concerns.

Compensating a Nanny on a Family Vacation

Before a family hires a nanny, the nanny’s compensation should be detailed fully, including the rate of pay for attending family vacations. It is important for families to remember that their vacation time is not the same as their nanny’s vacation time. A nanny who travels with a family and performs work responsibilities should be paid accordingly. Before the vacation begins, outline exactly what the nanny’s job responsibilities will be during the trip, the hours she will work, and what personal time she will have.

A nanny needs to be paid for all travel time to and from the destination. All travel expenses should be covered by the employer. This includes flights, accommodations, meals, and any other travel related expenses. A nanny needs to be paid her normal wages for all hours she is responsible for the children, but not for rest time as long they have appropriate sleeping accommodations, receive 5 hours of uninterrupted sleep in a row, and receive a total of 8 hours rest time in a 24-hour period. A nanny also doesn’t need compensation for any hours where she is free to go off on her own and not be responsible for the children.

Lastly, any weekly hours over 40 need to be paid as overtime pay (one and a half times the regular hourly pay).

Wages for a Nanny’s Overnight Stay

Many families only use nannies for daytime child care, but as schedules loosen up during the summer, there may an occasion when the nanny is asked to stay over for a night or two. Regarding compensation for this circumstance, families pay a flat rate for temporary nannies when they stay overnight. However, if a child is up during the night for more than an hour, the hourly rate would apply on top of the flat rate for each hour the child is awake.

Families should discuss the payment options with their nanny and make sure they are in agreement before the overnight stay begins. The nanny should keep track of any hours she is up during the night caring for the child.

Nanny Taxes for Temporary Summer Nannies

Some families don’t have regular nannies during the school year, but just utilize one here and there as the need arises. Some of these families may then need more regular child care during the summer, whether it’s to drop off and pick up the kids from camp, or simply to provide care and supervision throughout the day. A question many families have is whether or not they have to pay taxes for a nanny that only works for them during the summer. “Summer nannies,” as they’re sometimes called, are subject to the same payroll and tax rules as any other household employee. If a family pays an employee more than $2,000 (2017) in a year, they must withhold Social Security and Medicare taxes. So even if the nanny is only employed for the summer, if she earns over $2,000 in that time, the family must pay her legally by paying employer Social Security, Medicare, and unemployment insurances.

While temperatures and extra expenses seem to escalate quickly during the summer months, the IRS has some good news for parents:  Those additional expenses may help you qualify for a tax credit for summer child care!

Tax Credit for Summer Child Care

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

  1. The cost of day camp may count as an expense towards the Child and Dependent Care Credit.
  2. Expenses for overnight camps do not qualify.
  3. Whether your child care provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.
  4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.
  5. You may use up to $3,000 of the non-reimbursed expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals to figure the credit.

For more information, check out IRS Publication 503, Child and Dependent Care Expenses.

Contact us at (518) 348-0400 for more information.

Steps to Comply with Nanny Tax Requirements

steps to comply with nanny tax requirementsIf you are hiring a nanny or other household employee, it’s important to understand your obligations as a household employer. You must file all applicable nanny tax forms, Social Security, Medicare, federal and state unemployment insurances, and income taxes. These obligations apply to all full-time and part-time employees that you expect to pay over $2,000 (2017) in the course of a calendar year.

Some families pay their child care providers in cash or “off the books.” Although this gives the employee more income and saves families from the extra paperwork, it is illegal and can make you liable for unpaid childcare taxes, interest, and penalties. Therefore we recommend following this list created by our affiliate GTM Payroll Services to ensure you know the steps to comply with nanny tax requirements.

14 Steps to Nanny Tax Compliance

  1. Obtain household employer tax IDs (federal and state). In order to report childcare employment taxes and issue employee tax statements, you must obtain an employer identification number (EIN) from the IRS. Your state will require you to obtain a separate number for state unemployment insurance reporting and possibly income tax withholding reporting as well.
  2. File a new hire report with your state (if necessary). Generally, the information you must provide to state agencies includes the employee’s name, address, Social Security number, as well as your name, address, and federal employer identification number (EIN).
  3. Purchase workers’ compensation insurance (if required in your state). Workers’ compensation insurance protects both you as the household employer and your employees in case of a work-related injury or illness. See what the requirements are in your state.
  4. Adhere to all applicable tax, wage, and labor laws that pertain to household employment such as a Domestic Workers’ Bill of Rights. To see which laws impact household employment in your state, see our state-by-state guide.
  5. Verify your employee’s social security or tax identification number and complete Form I-9 for employment eligibility. Household employers must obtain a completed Form I-9 for every employee hired. This is used to verify the identity and employment eligibility of your domestic workers. Keep this form on file with copies of the documentation your employee provided for employment eligibility.
  6. Calculate employee tax withholdings. Your household employees’ wages fall under the Federal Insurance Contribution Act (FICA), so a portion of the wages you pay needs to be withheld and paid as Social Security and Medicare taxes. Both you and your employee are required to pay a percentage (7.65%) of the gross wages. You may pay the entire amount yourself and list the employee’s share as additional taxable gross income. The IRS, realizing that many employers will not want a large tax liability at the end of the year, strongly recommends quarterly estimated payments.
  7. Prepare and distribute paystubs (even if paying by direct deposit). Even though pay statement distribution isn’t required under federal law, most states have opted to pass state laws that require employers to provide regular statements about their pay and withholding. Employee name, Social Security number, pay rate, pay period, and deductions are what is generally required on the statements. Find out if your state has pay statement laws and whether pay stubs can be provided to employees electronically here.
  8. File and remit quarterly state employment taxes. Generally, all states require state income taxes to be paid quarterly with your state income tax department. See a list of state tax departments here.
  9. File and remit quarterly federal taxes using Form 1040-ES. The IRS encourages household employers to deposit federal nanny taxes four times a year using the 1040 ES form.
  10. Prepare and distribute Form W-2 to your employees by January 31 (for previous year’s taxes and wages). All wages and tax withholdings must be reported on your employees’ W-2 form at the end of the year. The W-2 form must be given to your employee, the IRS, and to your state.
  11. File Copy A of Form W-2 and Form W-3 with the Social Security Administration by January 31. See instructions on these forms here.
  12. Prepare Schedule H and file with your federal income tax return (Form 1040). Schedule H is filed annually and goes with step 9 on this list.
  13. Read and respond to government notices or alerts. When the IRS or another government agency contacts you about your household employment, it’s important to respond in a timely manner to avoid any penalties or other hassles.
  14. Monitor changes to tax, wage and labor laws that could potentially affect household employment. Some good websites to monitor information that could impact household employment can be found here. If your state is considering new laws like a Domestic Workers’ Bill of Rights or a paid sick leave law, make sure you stay informed on what the law entails and if it affects household employers.

The easiest way to ensure you are compliant with nanny tax laws is to have a professional service like GTM handle your household payroll. They will remove the hassles, worries, and risks of nanny tax compliance and give you peace of mind (plus more time in life for the things you enjoy).

Contact GTM for a free consultation at (800) 929-9213, or download their Complete Guide to Household Payroll for more information.

*The information contained within is designed to give the user general guidelines on the subject of household employment taxes. Tax laws can vary considerably from different taxpayers based on the circumstances and the state of residency. This information is not designed to serve as legal, accounting, or tax advice. GTM encourages you to consult with a competent tax advisor concerning specific matters before making any decisions. GTM does not accept any responsibility for positions taken by taxpayers for any interpretations on the information found within.

Creative Benefits for Nannies

creative benefits for nanniesFamilies looking to recruit the best household employees need ways to attract them, especially if they’re unable to pay higher salaries. Something that often does the trick is finding some creative benefits for nannies, particularly if those benefits address specific needs. Here are a few ideas.

Retirement Benefits
One benefit to consider is a 401K plan. Our affiliate company, GTM Payroll Services, has a SIMPLE 401K Plan offered through the National Household Employers Association (NHEA) that will not only give you a recruiting advantage over other families without a 401K plan and a retention tool for your nanny, but it will also help your employee build an excellent source of retirement income and experience the benefits of tax-deferred growth. Other options are the Individual Retirement Account (IRA) and the Roth IRAboth are fairly simple programs to establish as an employee benefit, and therefore, suitable as a household employee benefit.

Educational Reimbursement
Continuing education, training, seminars, and conferences play an important role in helping promote professional growth and elevate employee performance—making the educational reimbursement benefit a win-win proposition for both the employer and employee. You may also consider paying for professional membership fees or trade journal subscriptions. Employers who offer this benefit can claim up to $5,250 tax-free for employer-provided educational assistance; graduate-level course work is also covered. The IRS does state that employers who offer tax-free educational assistance are required to have a written plan describing the terms and benefits. If you decide to offer this benefit, laying out an educational assistance plan in your employee handbook or work agreement is essential.

Student Loan Repayment
For those nannies that have recently graduated, many of them may have accumulated substantial debt. A benefit families may wish to offer current or prospective employees is student loan repayment. One thing to keep in mind, however, is that repayment of a student loan is considered taxable income, and at present there’s no tax write-off for employers who offer a loan repayment benefit. Employers, however, do have some leeway on how to offer the benefit. The amount of the benefit can be offered monthly or as a lump sum, it can be capped, and it can be tied to an employee match. A waiting period is also fine.

Prepaid Legal Services
Some employers offer prepaid legal services as an employee benefit. Prepaid legal services may involve citizenship, divorce, adoption, and so on, and create a unique value to nannies who require legal advice and representation. Employers need to clearly state in the work agreement and the employee handbook the premium requirements for prepaid legal services, and if such services are provided at the employer’s discretion.

A few other benefit ideas include:

  • Provide your nanny with a mileage reimbursement or a gas card to help with their commute or with transporting children.
  • If your nanny has their own car, provide an auto club membership or periodically cover the costs of tune-ups and oil changes.
  • Establish an employee assistance plan or gift certificate to a spa/health club as a way to help your nanny de-stress.
  • Provide your nanny with scheduled free time each week for them to make personal errands and phone calls.

If you’re looking for an enticing benefit to attract new talent, one of the benefits described above may be something to consider. If these benefits aren’t desirable or doable, that’s okay. The important thing is that you appeal to potential employees by distinguishing yourself, and there’s no one way to do that!

For more information, contact us at (518) 348-0400.

Paying a Nanny Through Company Payroll

paying a nanny through company payrollQ: I own a business. Can I pay my nanny through my company payroll?

A: While it may be tempting to do so, it is illegal, in most cases, to pay a household employee on a business payroll.

The legal basis for keeping business and household payroll separate, according to the IRS, is that businesses can receive a tax break on their payroll costs because the employees directly contribute to the company’s success. A household employee does not directly impact the success of a business the way a business employee does, and therefore a nanny or other domestic worker’s wages must be paid on the employer’s personal federal income tax return, either annually or quarterly.

The only instances when reporting household employment taxes on the employer’s business federal income tax return are acceptable are:

  • if the employer is a sole proprietor, or
  • if the home is on a farm operated for profit.

In either of these cases, the employer may opt to include federal household employment taxes with their federal employment tax deposits or other payments for the business or farm employees.

Another way this issue arises is when it comes to health insurance. A company’s group health insurance policy cannot include household employees, as they are not employed by the company. Insurance companies will likely refuse to pay any benefits if you submit a claim for a household employee through a business insurance policy. Read about the ways you can help your household employee get health insurance coverage here.

Contact us for more information at (518) 348-0400.

Does My Nanny Have to Sign Her Timesheet?

does my nanny have to sign her timesheetQ: Our household employee submits timesheets each pay period. Is it mandatory that she sign those timesheets?

A: It is not a requirement that timesheets be signed. We recommend that employees acknowledge that their time records are accurate, either by signing them or by some other submission and acknowledgment method or technology. Having employees review and approve their timesheets prior to submission allows for prompt correction of errors and reduces the likelihood of unreported hours. Signing is an easy and a common way for employees to affirm the accuracy of their recorded hours.

If an employee fails to sign their timesheet, you should not withhold their pay, as it is fundamentally the responsibility of employers to track and pay for hours worked. If an employee performs work but fails to turn in a timesheet, you should make your best estimate as to hours worked based on all information available to you. If you discover changes are needed, you should make the correction as soon as possible.

Our affiliate company GTM Payroll Services has two solutions to help you keep an accurate record of your employee’s hours:

  1. Use this simple household employee attendance record to track your domestic worker’s hours worked per day plus hours used for vacation and other paid time off.
  2. For a completely automated, easy-to-use solution to track your employee’s hours as well as overtime, time-off requests, and accrual balances, check out GTM’s HomePunch Mobile. It’s the easiest way to streamline your timekeeping and eliminate errors from paper time sheets and manual data entry.

Please contact us at (518) 348-0400 if you have any questions.

Paying Nanny Taxes: Not Just for Cabinet Nominees

paying nanny taxes not just for cabinet nomineesFollowing the presidential election in November, new potential Cabinet members have been going through the nomination process in the Senate. Two of those nominees have come under fire for issues relating to the hiring and paying of household workers. President Trump’s choice for White House budget director, Mick Mulvaney, failed to pay more than $15,000 in household payroll taxes, jeopardizing his nomination to the post. Mulvaney needs to pay state taxes, penalties, and interest, despite saying he settled his federal tax bill. President Trump’s choice to lead the Labor Department, Andrew Puzder, has admitted that he employed an undocumented immigrant to work in his home, saying he has paid all back taxes to the IRS and the state of California. He claims that once he found out she was not legally permitted to work in the U.S., he terminated the housekeeper.

Of course this is not the first time we’ve heard of this issue; the subject of nanny taxes has come up with nominees for Cabinet posts for Bill ClintonGeorge W. Bush, and Barack Obama. But while these cases are very high-profile and make news headlines, paying nanny taxes is not just for Cabinet nominees. It’s the law for anyone who pays a household worker more than $2,000 (2017) in a year, and just because a family isn’t answering questions in front of a Senate panel, there are many ways to get caught paying an employee illegally.

One of the most common ways employers who aren’t paying legally are exposed occurs when their employee gets injured on the job. In this case study, not having workers’ compensation coverage can be extremely costly:

A household employer living in New York State hired a nanny to care for his children, but ignored the state’s workers’ compensation coverage requirement. One day the nanny slipped and hurt her back. The doctor asked how she got hurt, and she relates that it happened while she was working. This leads to a workers’ compensation claim. New York is one of the many states that require household employers to carry workers’ compensation insurance for their employees. Of course, the workers’ comp board in New York had no record of her even being employed because the employer hadn’t paid her legally. So not only was the household employer penalized $37,000 by the New York Workers’ Compensation Board for not having a policy, the New York State Department of Tax and Finance and the IRS got involved, requiring the employer to open their wallet again to cover the back taxes and penalties incurred by not paying their employee legally.

Another common way the government discovers an employer is not paying their employee legally is when that employee leaves the job and files for unemployment insurance. But that can lead to the state’s labor department having no record of the employee holding a job. Why not? Because the employer hasn’t been paying unemployment insurance. This immediately raises a red flag and the employer can expect a call from the state, with significant fines likely to follow.

A third way employers paying “off the books” are exposed is when their employee decides they want to start being paid legally. For example, the two parties originally agreed on not withholding taxes, but later the employee started to notice what she was missing; she can’t apply for a loan or obtain credit because she has no legal work history; she isn’t saving any money for retirement and isn’t eligible for Medicare or Social Security benefits; and she can’t apply for unemployment insurance if she leaves the job. She wants to start getting these benefits, and if the employer does not agree to start paying legally, she can sue the employer, resulting in paying back taxes and penalties once the illegal working relationship comes to light, along with court and attorney costs.

A final common way for an employer to be exposed for not paying nanny taxes is in the case of an audit by the IRS or state tax agency. The audit could be a result of one of the above examples, or if there is another reason for an audit to be conducted, the non-payment of nanny taxes would be discovered, leading to far more fines and legal troubles than the original reason for the audit would have generated.

The bottom line is that it’s illegal to avoid paying nanny taxes, whether you’re a nominee for a Cabinet position, or you’re a regular family from Anytown, U.S.A. that hires a household employee.

Read more information on the benefits for both employers and employees on paying nanny taxes, or contact us at (518) 348-0400.

Register for National Nanny Training Day 2017!

national nanny training day 2017Calling all nannies! Registration is now open for our annual educational event, National Nanny Training Day.

We hope you can join us for this FREE event. You’ll hear from a management consultant about professionalism in the workplace; see a presentation on how nannies should be prepared for, react to, and calm the children in her care in the event of an emergency; learn the benefits of being paid on the books; receive CPR training; and more! Lunch will be provided as well, along with raffle prizes and great giveaways. We know this year’s event is going to be bigger and better than ever!

CPR will be offered for those of you who did not attend last year. (If you participated last year, your certificate is good for another year.)

Did we mention it’s FREE? Click here to register – don’t miss out on what is always a fun and educational event!

Nanny Taxes Made Easy in 13 Steps

nanny taxes made easy in 13 stepsThis is the time of year when many household employers are scrambling to pull together 12 months worth of pay and tax information so they can issue their employee a W-2, submit Form W-3 to the Social Security Administration and begin preparing Schedule H to file with their personal tax return. This is especially true for 2017 nanny taxes since this is the first year that the deadline to submit forms W-2 and W-3 has been moved up to January 31.

It can be overwhelming on top of all of the other tax season aggravations and headaches.

If this sounds like you, make a commitment now to hassle-free 2017 nanny taxes. By following these 13 steps, you won’t have a mad scramble to get your forms submitted on time. In the long term, these steps will keep you in line with tax, wage and labor laws that apply to household employers. This will help reduce the risk of fines and/or penalties for noncompliance.

  1. Purchase workers’ compensation insurance - it’s required in New York.
  2. Adhere to the New York minimum wage requirement ($9.70/hour).
  3. Pay overtime of one and half times your employee’s hourly rate for all hours worked above 40 in a week. This is federal law.
  4. Follow all applicable tax, wage and labor laws in your state including the New York Domestic Workers’ Bill of Rights.
  5. Read and respond to government notices or alerts.
  6. Monitor changes to tax, wage and labor laws that could potentially affect household employment.
  7. Prepare and distribute pay stubs (even if paying by direct deposit). Include: employer name and address, employee name, pay period start and end dates, check date, check number, gross earnings, total deductions, net pay, current and YTD payroll information, PTO accruals, and withholding allowances (based on employee’s W-4).
  8. File and remit quarterly state employment taxes.
  9. File and remit quarterly federal taxes using Form 1040-ES.
  10. Prepare and distribute Form W-2 to your employees by January 31 (for previous year’s taxes and wages).
  11. Prepare and file Copy A of Form W-2 and Form W-3 with the Social Security Administration by January 31.
  12. Prepare Schedule H and file with your federal income tax return (Form 1040).
  13. Keep records in a safe place for at least seven years.

Interested in learning more about getting your 2017 nanny taxes done right? Contact us at (518) 348-0400.