2016 Household Employment Laws

2016 household employment lawsIt’s a new year, and with that come changes or new laws and regulations that impact employers across the country, including household employers. Here is a brief overview of 2016 household employment laws.

Minimum Wage
The minimum wage went up again in this year in New York, rising from $8.75 to $9 per hour. Household employers need to ensure that they are paying their nanny or other employee at least that amount. If you are already paying an employee more than the minimum wage, you are not required to increase their rate of pay.

Mileage Rate
The standard mileage rate changed on January 1st of this year to 54 cents per mile for business miles driven, a decrease of 3.5 cents from 2015. This applies to employers who ask their nanny or other employee to use their own vehicle when performing work-related duties (transporting children, running errands, etc.). Household employers affected by this change should make sure to revise their expense reports and policies accordingly.

Nanny Tax Threshold
Also note that for 2016, the domestic employee coverage threshold amount has increased to $2,000, up from $1,900 last year; this means that you are required to pay taxes if you pay a nanny or other household employee at least $2,000 in a year. For those employees that earn more than $200,000 in a year, employers are required to pay an additional Medicare tax of 0.9%.

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

2015 Year End Tax Planning for Households

2015 year end tax planningThe end of 2015 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 2015 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 2016. Some things to consider include:

  • Adding/decreasing your employee’s hours during the holiday season
  • Awarding a year-end bonus
  • Adjusting salary for 2016
  • Making note of the minimum wage increases in New York
  • Vacation pay for the holiday season

Also note that for 2016, the domestic employee coverage threshold amount will increase to $2,000, up from $1,900 this year; 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.

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

Home Office Tax Deductions

home office tax deductionsSetting up an office in your home? Generally, in order to claim any home office tax deductions, you must use the space exclusively as your principal place of business, or as a place to meet with patients, clients, or customers. If you’re self-employed as a sole proprietor, partner, or LLC member, you may be able to deduct the costs of maintaining an office at home.

In fact, current tax law gives you several ways to qualify for a home office write-off. Assuming you’re eligible, here’s the payoff:

  • You can deduct 100 percent of any expenses that are directly related to your home office, such as an additional phone line.
  •  You can deduct a percentage of indirect expenses that relate to your entire residence, such as mortgage interest and property taxes.

There are special rules for qualified daycare providers and taxpayers storing business inventory or product samples.

The great thing about home office deductions is they go on Schedule C (if you are a sole proprietor or single-member LLC owner) or Schedule E (if you are a partner or member of a multi-member LLC). Write-offs that appear on these business schedules are double tax savers, because they reduce both your income and self-employment tax bills.

Of course, there are some restrictions on home offices, along with rules on recordkeeping requirements. And if you are an employee, different rules apply.

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

Work Agreement for Nannies

work agreement for nanniesThe work agreement is an essential document for both the household employer and nanny. A comprehensive work agreement goes a long way in establishing a successful working relationship. Not only will it prevent problems from occurring, it will set the tone of the working relationship with open and clear communications. The most effective work agreement for nannies and other household employees is in writing and covers all aspects of working in your home—including the nanny’s work schedule, required daily duties, compensation, benefits, termination, and a confidentiality clause. Work agreements can be considered an important step in building a long-lasting relationship in which all parties clearly understand their responsibilities and expectations.

The work agreement also helps safeguard the cost of recruiting and obtaining a nanny. Turnover expenses can be high, especially considering the cost of time spent to interview, placement agency fees, training costs, and employer time lost from work or other activities.

Why create a work agreement?

  • A written work agreement helps to ensure the employment of a highly skilled nanny. It protects your confidential information. If a candidate does not want to join you in developing a work agreement, or does not wish to sign one that has been developed, red flags should appear immediately. Why does this nanny not want to enter into an agreement that details his or her job? The actual existence of a work agreement acts as a tool for you to target the best candidates—and discount those who are disagreeable.
  • The work agreement is a cooperative endeavor, ideally to be developed (and revised) together with your nanny.  It details the nanny’s job, including establishing a term of employment (e.g., the nanny job may be for a one-year term, with a date to review the nanny’s performance, the work agreement, and the possible extension of the employment to another year); your expectations (spell out the nanny’s duties—be specific and include important considerations to your household, such as protecting the personal and private information contained within the home); the employee’s expectations; your household procedures and instructions your nanny will use daily in the job; and the nanny’s compensation and benefits.

As a household employer, clear expectations are paramount. This is why the work agreement is so critical to the beginning of the employer-nanny relationship, even for a relationship on the best of terms. With it, both the employer and nanny are reducing the likelihood that problems will occur.

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

5 Nanny Tax Facts…or Myths?

nanny tax factsHaving a household employee can be a complicated situation; employers need to be aware of federal, state, and local tax and wage laws in order to stay compliant. There are many issues about which household employers may have questions – the list below answers some of the most common ones. Read on to learn about 5 nanny tax facts…or myths.

1. It is illegal to pay nannies through your company’s payroll.

FACT! It is not proper for an employer to pay a household employee through their business payroll. A household employee is an employee of the home, not the business, and therefore would not qualify for the tax deductions that would otherwise be allowed with a traditional business employee. In most cases, federal household employment taxes must be paid on the employer’s personal federal income tax return, either annually or quarterly. The only exception to reporting federal household employment taxes on the employer’s personal federal income tax return is if they are a sole proprietor or if their 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. For more information, refer to IRS Publication 926.

2. Nannies are entitled to overtime pay.

FACT (in New York)! The New York Domestic Workers’ Bill of Rights requires employers to pay overtime at time-and-a-half after 40 hours of work in a week, or 44 hours for workers who live in their employer’s home. Employees hired to provide babysitting services on a casual basis are exempt from minimum wage and overtime requirements, whether or not they reside in the household where they are employed.

3. Nannies are independent contractors.

MYTH! There are specific differences between an employee and an independent contractor. An employee is a person who takes instruction from the employer, has a schedule set by the employer and uses tools and equipment provided by the employer. An independent contractor is a person who works under their own conditions, sets their own schedule and uses their own supplies. Most nannies who work in an employer’s home whether it be on a temporary or full-time basis are considered household employees, not independent contractors because they work under the family’s control and have their schedule and pay set by the family. In the past, the IRS has made determinations that caregivers are considered employees and it is illegal for a family to treat them as independent contractors.

4. Employers do not need to track a nanny’s hours.

MYTH! According to the FLSA, employers are required to keep records on wages, hours and other items as specified by Department of Labor regulations. These records include hours worked each day and total hours worked each week. Not keeping proper time records makes it difficult to prove the hours an hourly employee has actually worked and when they may be eligible for overtime pay in the event of a wage and hour audit by the Department of Labor. Learn more about record keeping for your nanny or other employee.

5. Only full-time nannies need to be paid legally.

MYTH! Any household employee who earns $1,900 (2015) or more in a calendar year must be paid legally and the employer must withhold Social Security and Medicare taxes regardless of whether they work on a part-time or full-time basis. Employers must pay federal unemployment tax for any employee who earns wages of $1,000 (2015) or more in a calendar year. Since the wage threshold for these requirements is low, many times even the most part-time employee needs to be paid legally.

For more information about these and all issues regarding household employment, contact us at (518) 348-0400.

FLSA Changes Affecting Caregivers and Employers

flsa changes for caregivers and employersAs of January 1, 2015, the Final Rule created under the Fair Labor Standards Act (FLSA) will require most direct care workers to receive federal minimum wage and overtime pay protections. Direct care workers are workers who provide home care services, such as home health aides, personal care aides, senior caregivers, and companions. The Final Rule contains several significant FLSA changes affecting caregivers and employers, including the following:

1. The Department of Labor defines “companionship services” by the duties that home care services cover, including:

  • Engaging the person in social, physical, and mental activities including reading, games, running errands, and social events.
  • Activities of daily living such as dressing, grooming, feeding, and bathing.
  • Instrumental activities of daily living such as meal preparation, driving, light housework, and arranging medical care.

The definition of companionship services does not include providing medically related services which are typically performed by trained personnel.

2. Who can claim the overtime exemption?

Exemptions for companionship services and live-in home care workers are limited to the individual, family, or household using the services. Third-party employers (home care agencies) will not be able to claim a minimum wage or overtime exemption. Workers are only exempt if they are employed solely by a home care recipient, that person’s family member, or private household, and spends 20% or less of their weekly hours per care recipient on daily living activities.

3. Recordkeeping requirements have been revised as follows:

  • Individuals and private households that employ live-in home care workers can claim the overtime exemption for live-in domestic workers. However, if they reside in a state whose Department of Labor has dictated an overtime wage law, they must follow their state’s overtime regulations.
  • Third party employers like home care agencies cannot claim the overtime exemption and are required to pay employees at least the federal minimum wage and overtime pay for all hours worked.

For more information about the Final Rule under the FLSA, visit the Department of Labor website.

Is Your Nanny Changing Her Name?

nanny changing nameQuestion: If your nanny or other household employee gets married and asks you to start issuing paychecks in their married name, what are your record-keeping responsibilities?

When an employee officially changes their name for marriage or any reason, the employee needs to:

  1. Present you with a new signed Social Security card, issued in the correct name. Make a copy of this for your payroll records.
  2. Fill out a new W-4 Form, reflecting the change in name, marital status and withholding allowances.

It is the employee’s responsibility to provide this information before a paycheck can be issued in their new name. This ensures that taxes are properly credited to the employee’s account, and that quarterly and year-end reports match the records of the Social Security Administration and the IRS.

A newly married employee may also want to make beneficiary changes on a life insurance plan and may need to fill out an enrollment change form to add the spouse to a health insurance plan. You can also remind them to notify the following organizations of a name change:

  • DMV
  • Post Office
  • Voter Registration
  • Banks
  • Credit Cards
  • Doctors

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

Recordkeeping Requirements for Household Employers

recordkeeping requirements for household employersAccording to the Fair Labor Standards Act (FLSA), employers – including household employers – are required to keep records on wages, hours, and other items as specified by DOL recordkeeping regulations. No particular form is required, but certain identifying information about the employee and data about the hours worked and the wages earned is required by the FLSA. The law requires this information to be accurate. Recordkeeping requirements for employers include the following:

  1. Employee’s full name and social security number.
  2. Address, including zip code.
  3. Birth date, if younger than 19.
  4. Sex and occupation.
  5. Time and day of week when employee’s workweek begins.
  6. Hours worked each day.
  7. Total hours worked each workweek.
  8. Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
  9. Regular hourly pay rate.
  10. Total daily or weekly straight-time earnings.
  11. Total overtime earnings for the workweek.
  12. All additions to or deductions from the employee’s wages.
  13. Total wages paid each pay period.
  14. Date of payment and the pay period covered by the payment.

Payroll records should be kept for at least three years; wage computation records, such as time sheets, work schedules, and changes in wages, should be kept for two years.

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