Thursday, February 21, 2008
Nanny Salary Survey Results Posted
HomeWork Solutions, the nation's leading nanny tax compliance service provider, has been collecting responses on three regional salary surveys over the last 6 months. The first two surveys, covering Washington DC Metropolitan Area and New York City Metropolitan Area, are now closed and the results are posted at the 4nannytaxes.com website.
These surveys confirmed what many working families have already discovered - mainly that nanny care is the most expensive form of childcare. Full time nanny care generally starts at $30,000 per year, with quite a few families paying $40K - 50K in salary and taxes for their nannies. Many families resort to "nanny share" arrangements where the same nanny cares for the children of two or more families to reduce the individual family cost of nanny care.
Between 80% - 90% of nannies receive some benefits. Most receive between 5 and 10 paid days off per year, and the majority receive meals when on duty.
The surveys also confirmed IRS statistics on Nanny Tax compliance. Far more Washington DC area families pay the nanny taxes than their New York counterparts. This is most often explained by the high number of Federal Government workers and contractors in the DC area subject to security clearance investigations.
Go to Washington DC Area Nanny Salary Survey Results
Go to New York City Area Nanny Salary Survey Results
These surveys confirmed what many working families have already discovered - mainly that nanny care is the most expensive form of childcare. Full time nanny care generally starts at $30,000 per year, with quite a few families paying $40K - 50K in salary and taxes for their nannies. Many families resort to "nanny share" arrangements where the same nanny cares for the children of two or more families to reduce the individual family cost of nanny care.
Between 80% - 90% of nannies receive some benefits. Most receive between 5 and 10 paid days off per year, and the majority receive meals when on duty.
The surveys also confirmed IRS statistics on Nanny Tax compliance. Far more Washington DC area families pay the nanny taxes than their New York counterparts. This is most often explained by the high number of Federal Government workers and contractors in the DC area subject to security clearance investigations.
Go to Washington DC Area Nanny Salary Survey Results
Go to New York City Area Nanny Salary Survey Results
Wednesday, February 13, 2008
10 Nanny Hiring Tips: Safely Hire a Nanny
Careful, thorough nanny screening is your responsibility, and our concern.
The internet is a fantastic venue to put families with childcare needs in touch with individuals looking for nanny work. Most nanny applicants are honest and caring, seeking only the best family match for their skills and preferences. There will be, however, some bad apples in the barrel, and even the most honest and caring applicant
may not be the best match for your family.
Before you contact applicants, spend the necessary time up front to clearly define your family's needs. The nanny you select needs to complement your family's style, needs, and expectations. We recommend you have a list of "Must Haves", "Nice to Haves", and "Absolutely Not". This will make your telephone pre-screening go much more smoothly, eliminating some candidates before the initial in-person interview. This is a tremendous time saver. Here are some tips to help you make the best choice for your children and your family.
VERIFY APPLICANT IDENTITY. Ask the candidate to show you valid, government issued photo identification. Consider making a copy for your records. A candidate without a valid photo ID is not likely to posess valid US Work Authorization and most likely cannot be reasonably background checked.
REQUIRE A FORMAL JOB APPLICATION. You can download an agency developed job application form from 4nannies.com and other online venues - you do not have to reinvent the wheel! A formal job application should include the candidate's name, address, and all phone numbers and chronological job history and educational history. Look for unexplained gaps. Ask the candidate to help 'fill in the blanks.' Ask probing questions - often gaps indicate a prior poor employment experience, but they can signal a myriad of other problems.
REQUIRE REFERENCES. Character and employment references should not be friends and family of the applicant. Red Flag: Candidate cannot or will not provide non-related references.
INTERVIEW CAREFULLY AND METHODICALLY. Consider holding your first interview in a public place - a coffee shop or fast food venue with a children's play area. This protects you (no strangers coming to your home) and the nanny (many are reluctant to meet you in your home for the same safety concerns!).
Make sure the candidate is speaking more than you are! Behavioral interviewing is a best practice. Past behavior is a reliable predictor of future behavior - really! Ask the candidate to relate her history to a particular situation. For example, "Tell me about a time when you had to deal with a crying baby. What did you do? How did you feel?" Evaluate her experiences and responses against your requirements.
CHECK REFERENCES. Personally speak to all references. Verify how they know the applicant. Ask questions and wait for answers. Avoid giving verbal clues of agreement (umhum) or disagreement (really?).
SCHEDULE A SECOND, WORKING INTERVIEW. This should be at a time when you and the children are both present. Allow the applicant to observe your typical family rhythms, patterns, and interactions. Allow some time for the applicant to interact with the children independently (you observe). Pay the applicant for her time. Many a hiring mistake has been avoided by using this technique.
EVALUATE LOGISTICS. For the live-in applicant, has she ever lived away from home before? Is she mature enough for the relocation? Does your home's floor plan adequately provide for this option? For the live-out applicant, does she have a reasonable, reliable means of transportation to your home daily? NOT her boyfriend dropping her off or catching a ride with a friend!
OBTAIN SIGNED BACKGROUND CHECK RELEASE AUTHORIZATION. This begins the formal background checking process. Red Flag: If the candidate refuses to sign the consent or provide her SSN, DMV license number, and/or date of birth, move on immediately.
OBTAIN A SSN TRACE & ADDRESS HISTORY REPORT. This is part of the 4nannies.com basic background check. This provides all names and addresses associated with this Social Security Number over the last 7 years as known to the credit bureaus.
FINALIZE BACKGROUND CHECKING. Best practices are to search criminal records under all names and in all jurisdictions as reported by the SSN trace. Consider including Driver's License History, sex offender registry and National Criminal Records Locator (a database) checks.
Final Advice
TRUST YOUR INSTINCTS. Don't worry that your spouse or coworker might think you are paranoid. If your gut says there is something wrong, move on to other candidates.
WE STRONGLY ADVISE AGAINST HIRING CANDIDATES FROM ABROAD. In general, a family should assume that a foreign applicant does NOT have US work authorization and cannot be background checked until it has been proved otherwise.
And lastly, if this entire process overwhelms you consider obtaining the professional services of a reputable nanny placement agency (NannyNetwork.com to find local agencies). The experienced agency professional will bring a wealth of practical experience to the table, a tremendous asset for time-starved, inexperienced nanny employers.
(Selecting the best nanny placement agency is topic for another blog post!)
The internet is a fantastic venue to put families with childcare needs in touch with individuals looking for nanny work. Most nanny applicants are honest and caring, seeking only the best family match for their skills and preferences. There will be, however, some bad apples in the barrel, and even the most honest and caring applicant
may not be the best match for your family.
Before you contact applicants, spend the necessary time up front to clearly define your family's needs. The nanny you select needs to complement your family's style, needs, and expectations. We recommend you have a list of "Must Haves", "Nice to Haves", and "Absolutely Not". This will make your telephone pre-screening go much more smoothly, eliminating some candidates before the initial in-person interview. This is a tremendous time saver. Here are some tips to help you make the best choice for your children and your family.
Make sure the candidate is speaking more than you are! Behavioral interviewing is a best practice. Past behavior is a reliable predictor of future behavior - really! Ask the candidate to relate her history to a particular situation. For example, "Tell me about a time when you had to deal with a crying baby. What did you do? How did you feel?" Evaluate her experiences and responses against your requirements.
Final Advice
TRUST YOUR INSTINCTS. Don't worry that your spouse or coworker might think you are paranoid. If your gut says there is something wrong, move on to other candidates.
WE STRONGLY ADVISE AGAINST HIRING CANDIDATES FROM ABROAD. In general, a family should assume that a foreign applicant does NOT have US work authorization and cannot be background checked until it has been proved otherwise.
And lastly, if this entire process overwhelms you consider obtaining the professional services of a reputable nanny placement agency (NannyNetwork.com to find local agencies). The experienced agency professional will bring a wealth of practical experience to the table, a tremendous asset for time-starved, inexperienced nanny employers.
(Selecting the best nanny placement agency is topic for another blog post!)
Tuesday, February 12, 2008
Nannies: File for Tax Rebates
The media reports that President Bush is expected to sign the economic stimulus bill on Wednesday, February 13. What does this mean for nannies?
Most nannies will qualify for a rebate of $600, or $1200 if filing jointly, providing of course that the nanny paid at least that much in Federal income tax in 2007. If a nanny's 2007 federal tax liability is between $300 and $600 (single) or $600 and $1,200 (married), her rebate will be equal to whatever she paid in tax.
What about nannies who did not pay income tax? Any nanny who earned $3000 or more in 2007 qualifies for a flat rebate of $300 - this includes most summer nannies. There is a catch - you have to file a 2007 income tax return, even if no tax is due, to qualify for the rebate.
Included in the package is a $300 per child rebate, providing the child is 17 or younger on December 31, 2008. All taxpayers and children must have a Social Security Number (SSN) to qualify for the rebates. Taxpayers filing with Individual Taxpayer Identification Numbers (ITINs) do not participate.
The IRS will begin sending out rebate checks in May - but you have to have filed your tax return to qualify. If you file for an extension to file, you will not receive your rebate until your final 2007 tax return has been processed by the IRS.
These tax rebate checks are actually a 2008 tax cut, and are being paid early based on 2007 tax returns. If you qualify for a larger rebate when you eventually file your 2008 tax returns, you will receive the balance next spring.
Most nannies will qualify for a rebate of $600, or $1200 if filing jointly, providing of course that the nanny paid at least that much in Federal income tax in 2007. If a nanny's 2007 federal tax liability is between $300 and $600 (single) or $600 and $1,200 (married), her rebate will be equal to whatever she paid in tax.
What about nannies who did not pay income tax? Any nanny who earned $3000 or more in 2007 qualifies for a flat rebate of $300 - this includes most summer nannies. There is a catch - you have to file a 2007 income tax return, even if no tax is due, to qualify for the rebate.
Included in the package is a $300 per child rebate, providing the child is 17 or younger on December 31, 2008. All taxpayers and children must have a Social Security Number (SSN) to qualify for the rebates. Taxpayers filing with Individual Taxpayer Identification Numbers (ITINs) do not participate.
The IRS will begin sending out rebate checks in May - but you have to have filed your tax return to qualify. If you file for an extension to file, you will not receive your rebate until your final 2007 tax return has been processed by the IRS.
These tax rebate checks are actually a 2008 tax cut, and are being paid early based on 2007 tax returns. If you qualify for a larger rebate when you eventually file your 2008 tax returns, you will receive the balance next spring.
Labels: nanny income tax rebate, nanny tax rebate
Wednesday, February 06, 2008
Do Not 1099 Your Nanny: A Word to the Wise
Nannies are employees of the families they work for. They are not independent contractors, whether the family or nanny wants to be or not.
Families sometimes try to completely side step their employment tax obligations by giving the nanny a 1099 form at year end. In so doing, they avoid paying their share of Social Security and Medicare taxes, as well as unemployment taxes, and they push their tax obligations on to the nanny. This path allows the family the benefit of child care tax credits without the corresponding expense of paying their portion of the employment taxes.
Nannies are fighting back. A few years ago a nanny received a 1099 from her employer, a well known figure in the entertainment industry. She had negotiated a payment NET of taxes with the employer, and received her net pay as promised. At the end of the year (and after she had left their employment) she received a Form 1099. When she took the 1099 form to her tax preparer, she almost cried when she found out how much tax she owed. She followed the preparer's advice and did two things - paid the tax AND filed a SS-8 form, Determination of Employee Work Status for Purposes of Federal Employment Taxes. She stated she had been employed as a nanny, and that according to IRS regulations, her employers had improperly identified her as an independent contractor to avoid employment taxes.
Three years later, she received a refund of ALL of her Social Security and Medicare Taxes (15.3% of her gross wage or 'self employment tax') back as the IRS agreed with her that she was misclassified. Happy day for the nanny. The IRS then presented the employer with a bill for all Social Security & Medicare taxes - both employee and employer portions - along with calculated penalties and interest.
The moral of the story - nannies can and will fight back. It is best to set up your nanny taxes correctly up front and avoid the hassle completely. Your nanny is entitled to a Form W-2 at year end, and you are responsible for the remittance of all Social Security and Medicare taxes. The IRS is unambiguous on this - see IRS Publication 926. It does not matter if the nanny lives in or lives out, is full time or part time, or how she is paid. If you paid her $1500 or more in 2007, she is due a W-2 form.
Families sometimes try to completely side step their employment tax obligations by giving the nanny a 1099 form at year end. In so doing, they avoid paying their share of Social Security and Medicare taxes, as well as unemployment taxes, and they push their tax obligations on to the nanny. This path allows the family the benefit of child care tax credits without the corresponding expense of paying their portion of the employment taxes.
Nannies are fighting back. A few years ago a nanny received a 1099 from her employer, a well known figure in the entertainment industry. She had negotiated a payment NET of taxes with the employer, and received her net pay as promised. At the end of the year (and after she had left their employment) she received a Form 1099. When she took the 1099 form to her tax preparer, she almost cried when she found out how much tax she owed. She followed the preparer's advice and did two things - paid the tax AND filed a SS-8 form, Determination of Employee Work Status for Purposes of Federal Employment Taxes. She stated she had been employed as a nanny, and that according to IRS regulations, her employers had improperly identified her as an independent contractor to avoid employment taxes.
Three years later, she received a refund of ALL of her Social Security and Medicare Taxes (15.3% of her gross wage or 'self employment tax') back as the IRS agreed with her that she was misclassified. Happy day for the nanny. The IRS then presented the employer with a bill for all Social Security & Medicare taxes - both employee and employer portions - along with calculated penalties and interest.
The moral of the story - nannies can and will fight back. It is best to set up your nanny taxes correctly up front and avoid the hassle completely. Your nanny is entitled to a Form W-2 at year end, and you are responsible for the remittance of all Social Security and Medicare taxes. The IRS is unambiguous on this - see IRS Publication 926. It does not matter if the nanny lives in or lives out, is full time or part time, or how she is paid. If you paid her $1500 or more in 2007, she is due a W-2 form.
Monday, February 04, 2008
2008 Nanny Payroll By the Numbers
- $1600 - The wage threshold that obligates a family to pay the "Nanny Taxes." These include Social Security and Medicare, and may include Federal and State Unemployment taxes.
- $1712 - The maximum amount of advanced earned income credit a nanny (with at least one qualifying child) may receive in 2007. The nanny must also be expected to earn less than $33,241. (Unchanged)
- 50.5 cents per mile - the standard mileage rate, which families often use to reimburse nannies on a tax-exempt basis for the business use of the nanny's personal automobile. This includes transporting the children in their care and family errand-running.
- $115 - The tax-exempt monthly amount a family can provide to a nanny for qualified transit passes or van pool fees.
- $220 - The tax-free monthly amount a family can provide to a nanny for qualified parking benefits.
- $5,250 - The annual tax-exempt limit for employer-provided educational assistance.
- $1,100 - The amount per employee that a family may be charged for willful violations of the minimum wage and overtime requirements of the Fair Labor Standards Act. Nannies and other domestic workers ARE explicitly covered by the FLSA.
