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.

National Nanny Training Day 2017

national nanny training day 2017

Trump Moving Forward with Child Care Tax Plan

Trump Moving Forward with Child Care Tax PlanAs we posted in late 2016, President-elect Donald Trump has laid out plans to reduce taxes for those families paying for child care. Our friends at GTM Payroll Services now have an update on his plans and how they could impact household employers.

As Inauguration Day draws near, we’re getting a clearer picture of President-elect Donald Trump’s priorities when he takes office. Reducing child care costs was a centerpiece of Trump’s proposed tax plan during the campaign. It remains a focal point as he seeks Congressional support for his proposals.

“I am delighted to see that we’re looking at options for tax credits, tax incentives, ways for moms and dads to be able to write-off this child-care cost,” Rep. Marsha Blackburn, R-Tenn., recently told Jake Tapper on CNN’s “State of the Union.”

Blackburn has been working with Trump’s daughter Ivanka on child care legislation.

Child Care Discussions with Congress

Ivanka has already met with members of Congress. She discussed her father’s proposal for an above-the-line deduction that would be capped at the average cost of child care for the age of the child in the taxpayer’s state.

Families making less than $500,000 annually and single parents making less than $250,000 a year would be eligible for the deduction.

All families – regardless of income level – would also be able to establish Dependent Care Savings Accounts. These would be set up to help pay for the child care of specific individuals, including unborn children.

“You want to know your children are well cared for,” she said. “And there ought to be a way to have a savings account that you can start saving from on day one to help with those costs, because you know, it’s important to your life/work balance and the life of your family,” Blackburn said.

Impact on Legal Employment

Trump’s proposed child care deduction could also encourage more domestic employers to pay their nannies “on the books.” They would obviously need to report the amount they pay their employee to take advantage of the deduction.

This could then increase the amount collected in federal income taxes from nannies (whose wages are now not being reported) and the amount paid into Social Security and Medicare.

It’s estimated that there is more than $2.1 billion in unpaid federal income taxes and $4.6 billion missing in Social Security and Medicare contributions from employees who are paid “under the table.”

 

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

Save Your Career Opportunity by Paying Nanny Taxes

paying nanny taxesIt seems like the career opportunity of a lifetime. The incoming president’s transition team is considering you for a position in his cabinet or a senior-level appointment in a government agency or even an ambassadorship.

Or…it’s the chance you’ve waiting for your entire career. You’re being considered for partner in your firm or a C-level position in a major corporation.

In either scenario, you’ve worked hard. You’ve sacrificed. Your professional resume is impeccable. You’ve cleared the background checks. You’re cruising through the vetting process.

Then come the questions that make your palms sweat, create a lump in your throat and knock you off stride:

“Have you ever hired a nanny, in-home caregiver, housekeeper or any other individual to work in your home? If so, did you pay the proper taxes?”

For jobs that require a government security clearance, you will be required to fill out SF-86 (Questionnaire for National Security Positions). That form asks, “In the past seven (7) years have you failed to pay Federal, state, or other taxes when required by law or ordinance?”

As it turns out, you hired a nanny to look after your young children as you and your spouse both work. You pay the caregiver under the table because it’s easier, and who has time to manage payroll and taxes? The nanny doesn’t mind. There’s more money is her paycheck. Plus, how was anyone going to find out?

This situation likely plays out more often than you think, considering just an estimated 10 percent of household employers pay their workers legally.

From “Nannygate” to Today

Robert Rizzi, a partner and chair of the tax group at Steptoe & Johnson LLP, guides political appointees through the vetting process. He recently told Bloomberg BNA that he has had clients under consideration for nomination by the Obama administration who were immediately disqualified for failure to pay their nanny taxes.

Going back a few years, Zoë Baird was the first high-profile individual to fall victim to this mistake. She was President Clinton’s first choice for Attorney General. However, Baird withdrew her nomination when it came to light that she and her husband had hired illegal immigrants to serve as chauffeur and nanny. They also failed to pay the proper employment taxes on the workers.

The controversy became known as “Nannygate” and led to changes in the way household employers report their taxes. Congress reacted by passing a law that raised the minimum annual pay that triggers tax payments and gave birth to Schedule H. This form, which reports household employment taxes, is filed with a domestic employer’s personal tax return.

Now nanny taxes is one of the “heavily scrutinized” issues that nominees can expect to confront during the vetting process.

The past eight years has seen an increased scrutiny of tax returns, according to Rizzi. He calls it a “hot-button tax issue” for nominees. Problems with Timothy Geithner arose during his vetting process for the Treasury secretary position under President Obama. He hadn’t paid Social Security and Medicare taxes on his domestic workers for several years. Geithner subsequently paid his back taxes and filed amended returns. He was confirmed shortly after President Obama took office. Former Sen. Tom Daschle wasn’t so fortunate. He was forced to withdraw his nomination for Health and Human Services secretary because of several tax problems, including failure to pay income taxes on his driver.

How to Save Your Career Opportunity

What can you do if you’ve been paying your domestic worker off the books?

First, take care of your back tax obligations as soon as possible. Now is a great time to deal with this especially if you just hired a household employee in the past year. Our affiliate GTM Payroll Services offers back tax work at reasonable rates. They can help you correct issues and become compliant moving forward.

Or maybe you’re unsure if you’re doing it right and would rather not find out at an inopportune time. Call GTM at (800) 929-9213 for a free, no-obligation consultation and they’ll review your specific situation and help you determine your compliance and next steps.

Your career opportunity deserves it.

Year-End Tax Planning for Household Employers

year-end planning for household employersThe end of 2016 is only about 2 weeks away, so it’s important that everything is in order to ensure there are no surprises when it comes time to pay your nanny taxes next year. We recommend not putting off or ignoring your 2016 year-end tax planning. It’s important to look at your finances and think about any changes you will be making for the rest of this year and into early 2017. Some things to consider include:

  • Adding/decreasing your employee’s hours during the holiday season
  • Awarding a year-end bonus
  • Adjusting salary for 2017
  • Making note of the new minimum wage in New York
  • Vacation pay for the holiday season

The domestic employee coverage threshold amount will stay at $2,000 for 2017; this means that you are required to pay taxes if you pay a nanny at least $2,000 for the year. Make sure you keep accurate records of any changes you make, along with any changes to any federal or state tax and wage laws.

Contact us at (518) 348-0400 if you have any questions or need more information.