Nanny Tax & Payroll Updates! HomeWork Solutions

Angelita Reyes, recently convicted of criminal restraint in a domestic enslavement case (Earlier Story), was sentenced October 17, 2007 to serve three years probation and perform 50 hours of community service. Reyes also was ordered to pay restitution of $78,000 to the victim, Arlene Gado, 23, for unpaid back wages.

New Jersey Attorney General Anne Milgram noted that anyone with information about suspected human trafficking, forced labor or related crimes can call the Division of Criminal Justice at 1-866-TIPS-4CJ. Confidential tips and reports of wrongdoing may also be reported at the Division of Criminal Justice Web site.

Sadly, a young Minnesota woman lost her life this weekend responding to a Craigslist posting for a nanny job. You can view the story here:

http://www.foxnews.com/story/0,2933,305758,00.html

Nannies, take personal responsibility for your own safety when responding to advertisements online. We publish tips and warnings online here: https://www.4nannies.com//info/safejobsearchtips.cfm

Paid listing services (4nannies.com, enannysource, etc) are a bit safer for the nanny applicants because listings are charged to credit cards. Credit card authorization generally requires address verification, and predators typically cannot pass or do not want to create a trail. However, at the end of the day, predators can be anywhere, so be prudent and interview responsibly.

Families too need to be careful - it is not wise to invite a total stranger into your personal home without having met them first. Insist on references and check them. Don't allow you or your children to become a statistic. Our popular 10 Tips series is available online at: https://www.4nannytaxes.com/NEWS/INDEX.cfm. Your recruiting will be most successful if you are fully informed and organized in your search process.

Internet job matching is here to stay, and the vast majority of families and candidates are honest, trustworthy, serious adults. There are scams out there, however, and you need to search online with your eyes open!

Okay, off my soapbox now...

Labels: nanny interview danger, nanny interview safety, nanny job interview tips

There are some practical ways an employer can help their nanny build a tax-deferred savings account.

Employers can set up a SEP-IRA for their nanny. The contributions are 100% funded by the employer. Sometimes employees will ask to 'defer' a raise and have the $50 or so a week contributed by the employer into the SEP-IRA on their behalf. This benefits the employer as there are no employment taxes due on those contributions. The nanny benefits because their total income is lower, reducing their income taxes. SEP-IRA contributions are 100% vested to the employee.

Contributions to a SEP can be made between 0% to 25% of compensation up to a maximum of $45,000 for 2007 ($44,000 for 2006). SEP-IRAs can be established by any brokerage firm or bank.

The easiest solution (albeit not the least expensive to the employer) is to make a contribution to a nanny's traditional IRA. If she does not already have an IRA established, this can be done at any brokerage firm or bank. We refer clients to Sterling Capital Management Group, Jack Hudson, at 877.260.3570.

When an employer makes a contribution to a nanny's traditional IRA, this is reported as additional income to the nanny, and Social Security and Medicare taxes are due on the amounts. Most employers 'gross-up' the contribution, meaning that a net $2000 contribution would add $2166 to the nanny's reported income and cost the employer $2330 to make after Social Security/Medicare taxes are accounted for. The nanny deducts the hypothetical $2000 contribution amount from her personal income tax return, deferring the taxation of the contribution.

The contribution limits to a traditional IRA are as follows:

YEAR	AGE 49 & BELOW	AGE 50 & ABOVE
2002-2004	$3,000	$3,500
2005	$4,000	$4,500
2006-2007	$4,000	$5,000
2008	$5,000	$6,000

After 2008, the contribution limit will be indexed and rise in increments of $500 depending upon the level of inflation.

Employers who wish to make retirement savings contributions in excess of the annual IRA contribution limits and with employee participation may consider establishing a SIMPLE IRA. A SIMPLE IRA plan is a Savings Incentive Match PLan for Employees and, like a 401K, there is an employee contribution in the form of payroll deductions and an employer contribution. Employer contributions are established at account setup and are typically a dollar for dollar match of the nanny's contribution, up to 3% of the nanny's annual salary. Each employee is always 100% vested in (or, has ownership of) all money in her SIMPLE IRA.

The nanny's contribution to the SIMPLE IRA is subject to Social Security and Medicare taxes, but not to income taxes. The employer's matching contribution is tax free. The nanny's contribution to the SIMPLE IRA reduces her income subject to Federal and State income taxes on her W-2 and is separately reported on her W-2.

Labels: nanny pension plans, nanny retirement options, nanny retirement plans, retirement savings for nannies

The Social Security Administration has announce that wage payments to household employees are subject to Social Security and Medicare taxes (the Nanny Taxes) if they meet or exceed $1600 in 2008.

Rules changes to the so-called "Nanny Taxes" enacted in 1994 provide for annual indexing of the wage payment threshold to a household employee that triggers an obligation by the employer to report wages, provide the nanny or housekeeper a form W-2, and pay the Social Security and Medicare taxes to the IRS. Initially set at $1000 per year, this threshold has been steadily adjusted.

View historical household employment wage thresholds.

I had the pleasure of attending and presenting at the 2007 Nannypalooza conference, sponsored by the National Association for Nanny Care (NANC).

This two day professional conference for nannies included workshops on a variety of child related topics such as Money Sense for Kids, Understanding Language Development, Creating a Fun Filled Learning Environment at Home, Building Resilient Children, and Communicating with Employers in Tough Situations.

NANC is leading the movement to develop a national Nanny Credentialing System. The blueprint has been developed and published for a 3 tier credentialing system. They are seeking grants and/or corporate sponsors for the next phase of the credential development, the creation and testing of the credentialing examinations. Anyone looking to help should contact Lora Brawley at NANC.

The energy at the conference was palpable, and I left feeling proud to be a sponsor of such a fabulous learning and professional development opportunity for seasoned* and entry level nannies alike.


* PS: There was some humorous discussion on the proper term for nannies who have worked 5, 10 , 15 or more years in the industry. My personal favorite was "vintage"!

Labels: NAEC, nanny credential, Nannypalooza, National Association for Nanny Care

Families often wonder, "What can we do to get more stability in our childcare situation?" Why do some families seem to have one nanny after another, and another family might have the same nanny for five or more years? HomeWork Solutions' Kathleen Webb recently spent time with a nationwide group of professional nannies and they worked up a David Letterman-style list - the top ten reasons nannies quit.


10. ISOLATION: Occasionally a family outright forbids the nanny to leave the home with the child. Nannies look forward to taking a walk with the baby on a nice day, perhaps walking with another neighborhood nanny or at-home mom, chatting, enjoying the interaction. Toddlers look forward to spending an hour exploring the local playground. Webb observes, "Criminals get sentenced to house arrest - please don't do this to your child's caregiver!"

A live in nanny, especially one who has relocated for the job, must have the opportunity and means (transportation) to establish a social life outside the home. Generally a live in nanny who does not have reliable access to a vehicle in the evenings and weekends will not stay long.

9. LACK OF RECOGNITION: Nanny spends long hours with your children, with little interaction with other adults. Parents who are so preoccupied with the demands of their own careers and lives that they forget to express appreciation for the nanny often find themselves without a nanny unexpectedly. Words really do matter.

8. FAMILY DYSFUNCTION: Substance abuse, physical abuse, marital wars, emotional instability... any and all of these in a household can cause a nanny to quit.

7. MICRO MANAGEMENT: (SAHM and WAHM) When one or both parents spend a considerable amount of time at home while nanny is on duty problems often develop unless steps are taken up front to establish boundaries.

6. EXPENSES: Nannies who are asked to run family errands - whether groceries, dry cleaning, or party gifts - should be left adequate funds in advance. When nanny is required to provide transportation in her personal vehicle, adequate mileage reimbursement should occur.

5. TAXES: Employers, take the time to discuss wage and tax issues SPECIFICALLY at the very beginning and memorialize this in your Work Agreement. Consider giving the nanny a breakdown of the tax deductions from her paycheck with her first payment, and any time there is a change to her compensation. Consult a nanny tax specialist for assistance when needed.

4. POOR COMMUNICATION: The employer must make the time to establish regular communication with the nanny. Find 15 minutes once a week to just sit down and talk over the relationship and how things are going. Consider requiring a Nanny Log and actually look at it every 24 hours, jotting a note to nanny every few days with recognition, suggestions, or just the information that you might be a few minutes late on Thursday.

3. NON-COMPETITIVE COMPENSATION: New nannies especially are often eager to accept the nanny job and do not investigate local wages or costs. When nannies find out that $250 per week for a 50 hour week is NOT the norm, they will leave for a better paying job, often without notice.

2. DUTIES ADDED ONE BY ONE: Sometimes referred to as job creep, the family adds duties (housekeeping, cooking, shopping, watching your neighbor's son after school) with out appropriate compensation.

1. SCHEDULES THAT GROW, GROW, GROW: Careful! Abusing the nanny's schedule with unplanned overtime can cost you your nanny! Just as an employer will fire a chronically late employee, a nanny will quit on a chronically late parent. And remember, always compensate for overtime. You don't want a disgruntled employee filing a wage and hour grievance against you!



Kathleen Webb is a co-founder and President of Homework Solutions, a leading provider of nanny payroll and tax compliance services to families nationwide since 1993. More information is available online at 4nannytaxes.com.

Labels: job changing nannies, nanny quitting, nanny turnover

Peruvian diplomat Juan Carpio Malaga and his wife, Gina Carpio, are being sued by their former nanny, Prudencia Mendoza, for almost $500,000 in unpaid back wages.

Mendoza, also of Peru, entered the country on an G-5 visa, a courtesy to U.N. staff members that allows them to legally bring domestic workers into the United States from abroad. The visa requires there be an employment contract with the domestic and that certain working conditions must be provided, including payment at no less than the minimum wage, health insurance, and a residence. Mendoza worked for the diplomat from March 1997 until June 2004.

The suit alleges that the nanny was only paid $300 per MONTH, despite the contract, and that she was required to work 7 days per week 12 - 14 hours per day. After about a year, according to the suit, she ceased being paid at all. Mendoza alleges that Malaga would not allow her to leave and kept her passport from her.

Malaga denies all charges, and says he paid her wages into a bank account. The suit claims that the bank account in question was not Mendoza's and she had no access to the funds.

Labels: diplomatic visa abuse, domestic enslavement, G-5 visa violations

We are pleased to have 180 respondents in the last three weeks and have posted preliminary results at:

https://www.4nannytaxes.com/WashingtonDCNannySalarySurveyResults.cfm

In general, wages for live in nannies are in the $20K - $25K range (plus room and board) with little wage difference between entry level and more experienced nannies.

Washington DC area live out nannies continue to be well compensated by national standards. Reported salaries annualized between $30K - $40K, with a few approaching $50K.

We collected the data in hourly wage terms to try to create apples to apples comparisons - weekly wages vary significantly as nannies may work any where from 40 - 60 hours in a week.

Less than half of nannies are being paid for overtime - a particularly troubling statistic given that claims for wage and hour violations by employees currently exceed sex discrimination claims! Many families are leaving themselves open to substantial financial liability should the family/nanny relationship end badly and the nanny file a claim. (See earlier post on this subject). Recently, Dan Snyder, Washington Redskins owner was forced to pay his former nanny $44K in back wages.



The salary survey is still open and we would like to receive many more responses.

Labels: daniel snyder, nanny salaries, nanny salary survey, nanny wages Washington DC, Washington area nanny salary

The Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA), P.L. 108-458, Section 7213(b)(1), mandated that the Social Security Administration and Homeland Security form a joint task force to identify and implement improved security features for Social Security cards.

In April 2007, two changes were made.

• The card issuance date was added to the front of each card and was also added to the perforated attachment to the card.


• Signing instructions were added to the perforated card attachment. The instructions state ADULTS: Sign this card in ink immediately. CHILDREN: Do not sign until age 18 or your first job, whichever is earlier.

Effective April 2007 the cards also began to differentiate between the individual's first and last names by printing them on separate lines.

Additional security features are being added effective October 1, 2007. They include:

• A new background design, called a guilloche background pattern, will replace the existing marbleized pattern. The new pattern will continue to have the security feature of being erasable. This background is computer generated and very difficult to duplicate.
  
• A latent image has been added to the SSN card face, visible only when the document is viewed at specific angle or angles.


• A unique ink color mixture flowing from blue to aqua will color the background of the card.


• Color shifting inks were added to the face of the card. These inks have a multilayer light interference ink pigment imbedded that creates a noticeable color shift when moved in front of a light source. This feature is also used in currency.

All earlier versions of the SS Cards remain valid, and cardholders are not required to have their cards replaced. Therefore, employers are encouraged to use the free, Social Security Number (SSN) verification services offered by SSA to verify that their employees’ names and SSNs match our records.