By Stephanie Breedlove, Breedlove & Associates
We’re in the midst of the fall hiring season, so it’s a good time for a reminder about how nannies should be treated from a tax perspective. Without a doubt the biggest mistake I see families make with their nanny is classifying them as an independent contractor and providing them a Form 1099 at the end of the year. This is not the right thing to do – ever. The IRS has consistently ruled that nannies should be classified as employees and be provided a Form W-2 at year end.
Worker misclassification remains a big problem in the household employment industry as many nannies continue to be “1099’d.” Not only does this practice increase the nanny’s tax rate and decrease her benefits, but it also exposes the family to tax evasion charges.
Recently, the U.S. Department of Labor (DOL) released its budget details, including a new line item for $10 million in state grants to enhance enforcement of worker classification laws. This is one of the IRS’s top tax collection priorities right now.
If you or someone you know is about to take a job and the family wants to set you up as an independent contractor, now is the time to rectify this mistake. You’ll save 7.65% on your tax bill and you’ll be entitled to critical benefits, such as unemployment.
If you have any questions on how to make your employment arrangement legal, please visit www.breedlove.com or give us all call. We’re here to help!