Tuesday, July 10, 2007
Your Nanny and Form 1099
A nanny called for advice yesterday. She has worked for the same family for a few years and they always gave her a Form 1099 to report her wages at year end. This is a form given to independent contractors, and obligates the contractor to pay both the employer and employee portions of Social Security and Medicare taxes.
The nanny had a family emergency last year, and long story short fell behind in her taxes. She and her husband met with the IRS yesterday to work out a payment plan. The revenue agent, knowing that she is a nanny, asked why she was filing a 1099 instead of a W-2. He explained the financial impact to her and she was shocked.
The nanny and her husband owe the IRS about $12K for 2006. Of that $2800 (plus accumulated penalties and interest) is Social Security and Medicare taxes that should have been paid by her employer. I referred her to IRS Publication 926 and suggested she have a conversation with her employer.
A nanny, housekeeper, maid and most other domestics are employees of the household they work for. The employer is responsible to report wages and remit Social Security and Medicare taxes to the IRS, provide the worker(s) a W-2 form at the end of the year, and in most cases make payments to their state's unemployment insurance fund on a quarterly basis. The HomeWork Solutions' Frequently Asked Questions addresses this an many other matters employers need to know about their Nanny Tax obligations.
The nanny had a family emergency last year, and long story short fell behind in her taxes. She and her husband met with the IRS yesterday to work out a payment plan. The revenue agent, knowing that she is a nanny, asked why she was filing a 1099 instead of a W-2. He explained the financial impact to her and she was shocked.
The nanny and her husband owe the IRS about $12K for 2006. Of that $2800 (plus accumulated penalties and interest) is Social Security and Medicare taxes that should have been paid by her employer. I referred her to IRS Publication 926 and suggested she have a conversation with her employer.
A nanny, housekeeper, maid and most other domestics are employees of the household they work for. The employer is responsible to report wages and remit Social Security and Medicare taxes to the IRS, provide the worker(s) a W-2 form at the end of the year, and in most cases make payments to their state's unemployment insurance fund on a quarterly basis. The HomeWork Solutions' Frequently Asked Questions addresses this an many other matters employers need to know about their Nanny Tax obligations.
Labels: nanny 1099, nanny employee, nanny independent contractor, nanny W-2
