How to Talk Taxes with Your Nanny

NannyYou’ve found the perfect nanny for your family. You’re now in the process of negotiating a salary and your nanny says she wants to be paid “off the books.” You know the importance of being compliant with payroll and taxes, but your nanny likes the additional money in her paycheck. However, for the small cost in taxes, your nanny gains important short-term and long-term advantages. Here are some topics to discuss when talking about taxes.

Verifiable Income
If your employee applies for a car loan, student loan, mortgage or even a credit card, they’ll need to show that they can pay monthly installments. Being paid legally provides that. If your employee’s pay is not documented, they have no way to show that they have income.

Legal Employment History
Getting paid “on the books” creates a work history. This is also important when your employee applies for a loan, credit or their next job.

Unemployment Benefits
Let’s say your nanny has worked for you for a few years. Your children are now school age and no longer need a full-time nanny. Unemployment benefits will partially replace your employee’s lost wages for a period of time while they look for a new job.

Social Security and Medicare Benefits
Money paid by you and your employee into Social Security and Medicare is set aside to help pay for living and medical expenses when your employee retires.

Workers’ Compensation Benefits
With a worker’s compensation policy in place, your employee will receive assistance with medical expenses and lost wages if they are injured or become ill on the job. Workers’ compensation is required for household employers in many states.

Health Care Subsidy
The Affordable Care Act requires everyone to have health insurance or pay a fine. A health insurance marketplace has also been created to help people find coverage. If your employee buys a policy through this marketplace, they could qualify for a subsidy and cut the costs of their insurance. Provided, of course, they are being paid legally.

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

4 Key Reasons to Use a Nanny Payroll Service

key reasons to use a nanny payroll serviceThere is more to paying your household employee then just cutting them a paycheck each week. Taxes need to be paid (by the employer and employee) and insurance coverage may need to be in place, just to start.

The four key reasons to use a nanny payroll service are:

  1. Avoiding IRS Fines and Penalties for Non-Compliance
    A payroll service will accurately prepare, submit and pay your quarterly and annual federal, state and local  taxes on time to keep you in good graces with the IRS and state tax departments.
  2. Reducing Your Risk for an Audit or Lawsuit
    Nothing can suck up your time and resources more than an IRS audit of your finances because you haven’t paid your nanny properly. Unless it’s getting sued by a disgruntled employee.
  3. Taking Advantage of Tax Breaks
    You can get some of your money back in tax breaks. Specifically the Dependent Care Assistance Program (DCAP) and the Child and Dependent Care Tax Credit can potentially cut hundreds of dollars off your tax responsibility.
  4. Working with Happier Employees
    By paying taxes and being compliant your employees receive a number of benefits. They now have an employment history and verifiable income, which can help when applying for loans or credit. They may be eligible for unemployment, disability, workers’ compensation social security and Medicare benefits.

It can be difficult even for the most organized household employer to keep track of changes to tax and insurance laws and regulations that vary by state, and even by town or city. Ignoring the law and paying your nanny “under the table” will mean even bigger headaches down the road.

This is where a nanny payroll service comes in and will help make sure you’re compliant, giving you peace of mind and freeing up your time to do things in life you enjoy. Our friends at GTM  Payroll Services will take care of:

  • Paycheck distribution via direct deposit or live check
  • Electronic tax filings (or signature-ready returns)
  • Year-end tax filings including Schedule H, W-2 and W-3.
  • Compliance with federal and state tax, labor and wage laws

Contact us today at (518) 348-0400 to learn more, or just get a free payroll quote from GTM now!

Workers’ Compensation for a Bee Sting?

workers' compensation for a bee stingWorkers’ compensation insurance for nannies and other household employees is becoming a crucial issue for household employers to address, and here in New York, if you employ a nanny who works 40 hours in any week of the year, you are required to have coverage. Without coverage, if your nanny is injured or becomes sick while working, you may be responsible for medical bills and lost wages. The following example demonstrates another issue that may arise, especially during the summertime.

Yesterday your nanny was playing with the kids outside and was stung by a bee. She’s allergic and had to go the ER. Are you responsible for workers’ compensation for a bee sting?

Possibly. Whether or not this work injury qualifies for workers’ compensation benefits will depend on a few factors. The sting was not work-related, but the nanny was on the clock. Your workers’ compensation carrier will have to assess whether or not the sting arose out of and in the course of employment. A preexisting condition or existing illness is often only covered under workers’ compensation if it was worsened by working conditions or by performing the job duties. It may come down to how much either party wants to press its case. An ER visit may or may not be worth an insurance battle and the time of the lawyers involved.

We recommend you offer the workers’ compensation paperwork to your nanny, letting her know that she must file a claim in order to receive any workers’ compensation benefits. If she chooses not to file, then ask her to put the decision in writing and note on the workers’ compensation form that the nanny did not want to file a claim. Remind her that you will not retaliate against her either way.

In most circumstances, we recommend allowing your employee to file a claim and contacting your insurance carrier to inform them of any concerns. Once the carrier has the claim and related information, they can analyze the claim and decide how much they want to contest the benefits. In general, it’s best to let them handle the complicated appeals and approval process. After all, they want to control costs just like you do.

No matter how this particular claim plays out, you should inspect your home and arrange for safe removal of any beehives or other pest infestations that present a hazard.

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

Eight Steps to a Successful Nanny Share

steps to a successful nanny shareThinking about participating in a nanny share with another family? In a nanny share, the nanny cares for the children of two or more families at the same time.

This arrangement can help you save money and maintain your flexibility with child care. Your children will still receive individual attention from the nanny and get the added bonus of socialization with the other kids in your share.

Remember, a nanny share is a business relationship you enter with another family (or families) and the nanny. To ensure a successful nanny share — one that benefits you, your children, other families, and the nanny — make sure you follow these important steps.

1. Create a Work Agreement
Get together with the other family/families and create a work agreement to specify the nanny’s schedule, wages, benefits, and responsibilities.

2. Communicate throughout the Process
The key to any business relationship is communication. This means between you and the other family/families and with the nanny. Make sure any issues between the families are worked out BEFORE talking with the nanny. This makes sure your communication is clear and eliminates confusing or conflicting messages.

3. Register with the IRS
Each family must register with the IRS and the New York State revenue department. A tax identification number will be issues to each family.

4. Obtain Workers’ Compensation Insurance
New York requires workers’ compensation insurance for domestic employees who work 40 or more hours in any week. For nanny shares in New York, each family must obtain coverage for the nanny.

5. Provide Your Nanny with Employment Forms
Your nanny must complete an I-9 form and a W-4 form for each family.

6. Withhold Taxes from Your Nanny’s Pay
Each family must withhold federal and state taxes from each paycheck.

7. Complete a Schedule H
Each family must complete a Schedule H form when filing their personal income taxes. Schedule H accounts for the federal taxes withheld from your nanny’s pay.

8. Issue Form W-2 at End of Year
Each family must issue Form W-2 to the nanny at the end of the year.

The tax responsibilities and legal obligations for a nanny share can be complicated and time-consuming. Doing it incorrectly could mean fines and penalties from the IRS. Being non-compliant with the law — paying your nanny under the table — could lead to audits or employee lawsuits. Using a payroll company like our affiliate company GTM Payroll Services will remove the guesswork, ensure you are compliant, and free up your time for the things in life you enjoy.

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

When Do You Have to Report a Workers’ Comp Accident?

worker's comp accident reporting in new yorkWe have discussed the importance of having a workers’ compensation insurance policy in your home if you have a nanny or other domestic worker. And in New York, if you have an employee that works 40 hours or more in any one week of the calendar year, you are required by law to have both workers’ comp and disability insurance policies. But that doesn’t mean you have to file a claim for each and every injury sustained by your employee while on the job.

Whenever an injury exceeds any one of the following limitations, a Report of Accident Form (Form C-2) must be filed with the Workers’ Compensation Board within 10 days of the occurrence if:

  1. the injury results in loss of time from work beyond one day following the day of injury; or
  2. treatment for the injury involves more than “ordinary first aid”; or
  3. more than two first-aid treatments are, or will be, required.

It is possible that the need for a third treatment of an injury may not be apparent until after the 10-day reporting period expires. The only reasonable interpretation of the law is that the reporting time limit in such a case does not apply until it becomes known by the employer that additional treatments are necessary.

Form C-2 should be completed and filed as soon as it is known that the injury falls within the reporting requirements. An explanation for late filing should be included on the report.

By not reporting minor injuries, where no report is required, your Workers’ Compensation Policy will have a more favorable experience modification factor, which may help reduce premium costs. Of course, you will then need to pay the medical expenses in lieu of the insurer.

However, a written record of all injuries sustained by employees, including those for which no Report of Accident Form must be filed, must be kept by the employer for 18 years and made available whenever directed by the Workers’ Compensation Board.

Our partners at GTM Payroll Services help household employers obtain workers’ comp coverage and provide expert advice on insurance law compliance. For more information, contact us at (518) 348-0400.

Source: Professional Insurance Agents – New York

The Importance of Workers’ Compensation Insurance

workers' compensation insurance for nanniesThe International Nanny Association’s 30th Annual Conference is currently underway in Cancun, Mexico, and one of the workshops being held tackles the importance of workers’ compensation insurance for household employers. This is an issue that more and more employers are finding they need to address, either because their state requires they provide it for their nanny, or because they are worried about the consequences of not having a workers’ comp policy in place should their nanny get injured on the job.

Note: In New York, all household employers are required to provide both workers’ compensation and disability insurance for any nanny or other employee that works at least 40 hours in any week (so even if your nanny usually only works 30 hours a week, if she were to work 40 hours in one week at any time, you would need to have a policy in place).

To help illustrate the importance of having workers’ compensation insurance – even if you only have a part-time nanny – please see the following example of how not having insurance can impact a household employer and their employee.

The Smith family decided they needed to hire a full-time nanny, Jenny, to provide child care for their one-year-old son. Both parties agreed that the nanny would be paid “off the books” to avoid paying any taxes. Two weeks into her employment, Jenny was working in the Smith’s home and bent over to pick up the baby boy. Upon lifting him up, Jenny felt intense pain in her back, and after the family returned home, Jenny informed them she needed to go to the hospital as her back was causing her great suffering.

At the emergency room, the intake desk worker asked Jenny where the injury had occurred, and she informed them it was while she was at work in the Smith’s home. At this point, her injury is now considered a workers’ compensation case and she will fill out the appropriate paperwork. The doctor informs Jenny that she will need to be on bed rest for the next two weeks, and will then require three weeks of physical therapy to heal her injury.

The Smiths now face a problem – their employee will be out of work for at least 2-3 weeks, with possibly limited availability during her physical therapy treatments. This means they will have to hire a temporary replacement for Jenny. Jenny expects that the Smiths will compensate her for the hours she will miss while recovering and will cover her medical bills as she doesn’t have health insurance. The Smiths do not want the added expense of paying for Jenny’s bills and her lost wages on top of paying a replacement nanny. But the Smiths also fear Jenny will sue them if they do not compensate her.

The Smith family is now at risk of:

1) being exposed as paying their employee illegally (“off the books”) if there is a lawsuit

2) being exposed as paying their employee illegally if Jenny has her own health insurance

3) being sued for medical bill payments and compensation for lost wages

4) facing even further penalties because they live in New York, where workers’ compensation insurance is required

For more information and to learn how our affiliate company, GTM Payroll Services, helps families obtain workers’ comp coverage for families, contact us at (518) 348-0400.

Nanny Injured on the Job – Now What?

nanny injured on the jobWas your nanny injured on the job? In New York State, you are required to have workers’ compensation insurance if you employ a nanny for at least 40 hours per week, or if you employ a live-in nanny. Workers’ compensation policies cover you and your employee in case he or she is injured while working in your home or traveling with you as part of the job. Your workers’ compensation policy contains a posting notice providing the insurance company name, policy number, and contact information.

Should an injury or illness occur, here are the steps to take:

  1. Contact your workers’ compensation carrier if there is an on the job injury or illness as a result of the employment.  The seriousness of the injury does not necessarily matter.  If the employee requires medical care or will be missing work due to the injury or work related illness, the employer should report the incident. Sometimes nothing further comes of the incident except a medical bill. However, there may be complications unknown at the time of the initial incident and reporting the claim can help to keep future bills in check.
  2. Be prepared to provide the claim adjuster with some pertinent information:
  • Date of incident
  • Name of employee
  • Brief description of the injury and how it happened
  • Your workers’ compensation policy number
  • Phone number or email address on how the adjuster can contact the employee
  1. The adjuster will contact the employee directly for further details.
  2. A form will be sent to the employee to complete.  There will be a section for the employer to fill in their information and employment information, a section for the employee, and a section for the doctor to complete.  The form is then returned to the insurance company.
  3. The adjuster will continue to correspond with the employee and possibly the medical provider until the claim is complete.

Our partner GTM Payroll Services can provide workers’ compensation policies for household employers. Contact us at (518) 348-0400 for more information.