By Stephanie Breedlove, Breedlove & Associates
The IRS officially opened the tax filing season on January 31 – the same day as the requirement for employers to mail or give W-2s to their employees. Now that a few days have passed since this deadline, I’m hearing from quite a few nannies asking me the same question:
“I know I’m supposed to get a W-2 to do my taxes, but the family hasn’t given me one yet. What should I do?”
If you’re in this same position, don’t worry, there are a few things you can do to make sure your 2013 taxes are taken care of:
1. Ask the family if they’ve prepared your W-2 and when you can expect it. It’s entirely possible that the family got busy and completely forgot to prepare your W-2, or they didn’t realize the deadline was January 31. Also, if you recently moved and didn’t update the family with your new address, they could have mailed it to the wrong place.
2. If you discover the family isn’t going to provide a Form W-2 because they didn’t withhold or pay taxes last year, remind them that failing to handle the “nanny tax” obligations is extremely risky (felony tax evasion with expensive penalties) and denies you several important benefits. They may think that nanny taxes will be very expensive, so it’s worth letting them know that tax breaks for childcare expenses can offset most – if not all – of their employer tax costs.
3. Don’t accept a Form 1099 from the family in place of a W-2. This form is for independent contractors only. This is important to you financially because independent contractors have to pay the entire FICA tax liability (15.3%) whereas employees only have to pay half (7.65%). For a caregiver making $30,000 per year, that’s a difference of $2,295! It not only hurts your pocketbook, it’s also risky for the family. The IRS has ruled definitively that nannies should be classified as employees and families that misclassify their employee as an independent contractor are subject to tax evasion charges.
4. If the family simply refuses to give you a W-2 prior to the April 15 tax reporting deadline, you’ll be forced to file Form 4852, which is the substitute for Form W-2. Filing this form can trigger an audit for the family, but as a last resort, it’s the only way to legally report your income to the IRS. The form and instructions for filing it are available here.
If you or the family has any questions or concerns during this process, just give us a call at 888-273-3356. We’re here to help!