Friday, April 14, 2006
Immigration Reform and the Nanny Taxes
You cannot watch the evening news or listen to the radio without hearing the latest on the immigration debate. Immigrants are protesting demanding citizenship paths; citizens are fussing about controlling the border, guest worker vs. amnesty, the debate rages.
Absent from the public debate is the impact any immigration reform legislation might have on the current employers of the illegal aliens. While most illegals working in industry are being paid on the books and paying taxes, this is not true of the majority of illegals working as domestics - nannies, maids, housekeepers.
The overall tax compliance rate for domestic workers is abysmal - estimated in the 20 - 30% range. Reliable figures don't exist for what portion of these workers are illegals (non-documented immigrants) but there is no denying that these numbers are substantial. From the Irish nannies working in New York City to the Polish housekeepers in Chicago to the Hispanic maids and housekeepers in Texas, non-documented workers staff a large number of domestic employment positions.
So what will happen? All of the current proposals floating around Washington will requires background checking of any illegal seeking a permanent or legal status. Part of that will be documentation that the illegal didn't break the law, including paying taxes.
Families who have been employing these workers and not paying taxes face enormous risks. These workers, when faced with the opportunity to get a green card, will likely have a change of heart about not paying taxes. Families will be forced to choose between reporting and paying the back employment taxes, with the associated penalties and other fees, or discharging the worker. Even if the worker demanding that taxes be paid is fired, the family is still at risk. The new assertiveness of the illegal community, coupled with the infamous 'grapevine' of information sharing, should give one pause. Why wouldn't that fired worker just rat out the employer anyway? Remember, the burden of collecting and remitting the employment taxes rests on the employer. Employers who fail to collect remain responsible to pay the employment taxes, and there is no statue of limitations on employment tax liability.
Today, the family's and nanny's economic needs are in sync. The family wants to minimize its childcare or housekeeping costs, the nanny or housekeeper sees no value to paying taxes when they cannot participate in the benefits (Social Security, Medicare). One can see a future, however, when these economic needs are vastly divergent. The illegal who is offered a path to legalized status could very well have a complete change of heart on the tax issue if that is the sole barrier to the legalized status.
HomeWork Solutions provides payroll and payroll tax services to household employers nationwide. We have assisted thousands of employers with 'back tax' issues, from as little as a year to as many as 20+ years. HomeWork Solutions website has more information as well as an informative FAQ.
Absent from the public debate is the impact any immigration reform legislation might have on the current employers of the illegal aliens. While most illegals working in industry are being paid on the books and paying taxes, this is not true of the majority of illegals working as domestics - nannies, maids, housekeepers.
The overall tax compliance rate for domestic workers is abysmal - estimated in the 20 - 30% range. Reliable figures don't exist for what portion of these workers are illegals (non-documented immigrants) but there is no denying that these numbers are substantial. From the Irish nannies working in New York City to the Polish housekeepers in Chicago to the Hispanic maids and housekeepers in Texas, non-documented workers staff a large number of domestic employment positions.
So what will happen? All of the current proposals floating around Washington will requires background checking of any illegal seeking a permanent or legal status. Part of that will be documentation that the illegal didn't break the law, including paying taxes.
Families who have been employing these workers and not paying taxes face enormous risks. These workers, when faced with the opportunity to get a green card, will likely have a change of heart about not paying taxes. Families will be forced to choose between reporting and paying the back employment taxes, with the associated penalties and other fees, or discharging the worker. Even if the worker demanding that taxes be paid is fired, the family is still at risk. The new assertiveness of the illegal community, coupled with the infamous 'grapevine' of information sharing, should give one pause. Why wouldn't that fired worker just rat out the employer anyway? Remember, the burden of collecting and remitting the employment taxes rests on the employer. Employers who fail to collect remain responsible to pay the employment taxes, and there is no statue of limitations on employment tax liability.
Today, the family's and nanny's economic needs are in sync. The family wants to minimize its childcare or housekeeping costs, the nanny or housekeeper sees no value to paying taxes when they cannot participate in the benefits (Social Security, Medicare). One can see a future, however, when these economic needs are vastly divergent. The illegal who is offered a path to legalized status could very well have a complete change of heart on the tax issue if that is the sole barrier to the legalized status.
HomeWork Solutions provides payroll and payroll tax services to household employers nationwide. We have assisted thousands of employers with 'back tax' issues, from as little as a year to as many as 20+ years. HomeWork Solutions website has more information as well as an informative FAQ.
