Tuesday, June 24, 2008
Yet More Reasons for Nanny Tax Compliance...
Bob King, Esq., President of Legally Nanny reports that H.R. 5804, the Taxpayer Responsibility, Accountability and Consistency Act of 2008, recently introduced in Congress, could impose stiff penalties for families misclassifying nannies as "independent contractors."
"H.R. 5804 would significantly increase penalties for employers who misclassify workers as independent contractors instead of correctly classifying them as employees," reports Mr. King. "Additionally, the bill places the burden of proof on the taxpayer to demonstrate that the worker was properly classified. Finally, in addition to increasing the penalties for failing to properly pay employees and provide correct payroll information such as W-2 forms, the legislation also imposes increased penalties for intentionally disregarding the worker's proper classification."
Mr. King advises that this bill is directly relevant to nanny employers. "Under both federal and state law, nannies and other household staff are employees; they are not independent contractors. Yet some clients insist on mischaracterizing nannies and other domestic workers as independent contractors - or simply avoiding the subject altogether - in an effort to avoid paying household employment taxes."
"H.R. 5804 heightens the danger to (household employers) mischaracterizing such workers. At Legally Nanny we've assisted scores of clients in hiring, employing, and paying nannies, elder care providers, and other household employees legally."
Legally Nanny offers a comprehensive package to new household employers that includes the copyrighted Legally Nanny Hiring & Employment Guide and an employment agreement specifically tailored to each client's unique household employment situation. Equally important, their one flat fee entitles clients to a full year of responsive, knowledgeable service, and if the household employee leaves within one year of the client retaining the service, they will re-do all the employee paperwork again for free.
For more information on legal issues surrounding nannies and other household employment workers, please visit www.legallynanny.com.
Bob King has practiced labor & employment law in Orange County, California. He represents household employers, domestic employment agencies, businesses and individuals in a wide variety of legal matters, including defending against claims and litigation from employees and charges and investigations from government agencies.
Bob advises clients on hiring, evaluation, accommodation and termination matters; wage and hour issues; workplace policies, handbooks, agreements and contracts; and resolving client and business disputes. Bob also serves as the General Counsel for the Association of Premier Nanny Agencies, on the Board of Directors for the International Nanny Association, and has served as an expert witness in household employment litigation.
This material is for informational purposes only; it is not legal advice.
"H.R. 5804 would significantly increase penalties for employers who misclassify workers as independent contractors instead of correctly classifying them as employees," reports Mr. King. "Additionally, the bill places the burden of proof on the taxpayer to demonstrate that the worker was properly classified. Finally, in addition to increasing the penalties for failing to properly pay employees and provide correct payroll information such as W-2 forms, the legislation also imposes increased penalties for intentionally disregarding the worker's proper classification."
Mr. King advises that this bill is directly relevant to nanny employers. "Under both federal and state law, nannies and other household staff are employees; they are not independent contractors. Yet some clients insist on mischaracterizing nannies and other domestic workers as independent contractors - or simply avoiding the subject altogether - in an effort to avoid paying household employment taxes."
"H.R. 5804 heightens the danger to (household employers) mischaracterizing such workers. At Legally Nanny we've assisted scores of clients in hiring, employing, and paying nannies, elder care providers, and other household employees legally."
Legally Nanny offers a comprehensive package to new household employers that includes the copyrighted Legally Nanny Hiring & Employment Guide and an employment agreement specifically tailored to each client's unique household employment situation. Equally important, their one flat fee entitles clients to a full year of responsive, knowledgeable service, and if the household employee leaves within one year of the client retaining the service, they will re-do all the employee paperwork again for free.
For more information on legal issues surrounding nannies and other household employment workers, please visit www.legallynanny.com.
Bob King has practiced labor & employment law in Orange County, California. He represents household employers, domestic employment agencies, businesses and individuals in a wide variety of legal matters, including defending against claims and litigation from employees and charges and investigations from government agencies.
Bob advises clients on hiring, evaluation, accommodation and termination matters; wage and hour issues; workplace policies, handbooks, agreements and contracts; and resolving client and business disputes. Bob also serves as the General Counsel for the Association of Premier Nanny Agencies, on the Board of Directors for the International Nanny Association, and has served as an expert witness in household employment litigation.
This material is for informational purposes only; it is not legal advice.
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Massachusetts to Target Enforcement of Employee Mis-classification
I blogged on June 10, 2008 on the risks household employers run when they pay their nanny or housekeeper 'under the table.' Massachusetts recently announced an enforcement initiative that will attempt to crack down on "the underground economy of workers being paid in cash, not getting overtime, or being unlawfully called "independent contractors," according to a report in The Republican ( Springfield, MA ). These practices cost the state "$100 million in unpaid income tax payments and another $100 million in unpaid workers compensation each year, according to a Harvard study."
The Massachusetts State Department of Labor has established the Joint Task Force on the Underground Economy and Employee Misclassification. The task force is tasked with "working to bring those employers who skirt the laws of the Commonwealth into compliance" according to the agency website.
Nannies and other household workers such as housekeepers and maids are employees of the household they work for. According to IRS estimates, 70 - 80% of families employing these workers either mis-classify the worker as an 'independent contractor' or completely pay the worker under the table. This costs the Federal and state governments tens of millions of dollars annually from household employment alone, as well as robbing these workers of their eligibility for unemployment benefits when the job ends.
More information about the classification of household employees such as a nanny, as well as tax and labor laws that apply to these workers can be found in the HomeWork Solutions' Frequently Asked Questions.
The Massachusetts State Department of Labor has established the Joint Task Force on the Underground Economy and Employee Misclassification. The task force is tasked with "working to bring those employers who skirt the laws of the Commonwealth into compliance" according to the agency website.
Nannies and other household workers such as housekeepers and maids are employees of the household they work for. According to IRS estimates, 70 - 80% of families employing these workers either mis-classify the worker as an 'independent contractor' or completely pay the worker under the table. This costs the Federal and state governments tens of millions of dollars annually from household employment alone, as well as robbing these workers of their eligibility for unemployment benefits when the job ends.
More information about the classification of household employees such as a nanny, as well as tax and labor laws that apply to these workers can be found in the HomeWork Solutions' Frequently Asked Questions.
IRS Increases Mileage Reimbursement Rates through December 31
The IRS mileage reimbursement rate, the rate typically used by nanny employers to reimburse their nanny for the business use of her personal automobile, is scheduled to increase July 1, 2008.
The rate will increase to 58.5 cents a mile for all business miles driven from July 1 through Dec. 31, said the IRS, which noted that 50.5 cents was the rate in effect for the first six months of 2008.
"Given the increase in (gasoline) prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile. We want the reimbursement rate to be fair," IRS commissioner Doug Shulman said in a statement.
Many nannies use their personal automobiles to transport the children of their employers, either to preschool, lessons, or simply social engagements. These nannies may also run errands for their employers, such as grocery shopping or dry cleaning drop off/pick up. Families typically rely on the published IRS reimbursement rate to calculate the expense reimbursement to their nanny.
The rate will increase to 58.5 cents a mile for all business miles driven from July 1 through Dec. 31, said the IRS, which noted that 50.5 cents was the rate in effect for the first six months of 2008.
"Given the increase in (gasoline) prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile. We want the reimbursement rate to be fair," IRS commissioner Doug Shulman said in a statement.
Many nannies use their personal automobiles to transport the children of their employers, either to preschool, lessons, or simply social engagements. These nannies may also run errands for their employers, such as grocery shopping or dry cleaning drop off/pick up. Families typically rely on the published IRS reimbursement rate to calculate the expense reimbursement to their nanny.
Labels: nanny business use personal automobile, nanny driving, nanny mileage reimbursement rate
Thursday, June 12, 2008
Move to Raise IRS' Mileage Reimbursement Formula
Senator Norm Coleman (R-Minnesota) has requested that the IRS increase the mileage reimbursement rate (currently $0.505 per mile) to reflect the sudden and dramatic increase in fuel costs. This rate typically adjusts on an annual basis, however, there is some precedent for interium adjustments such as the 4 months following Hurricane Katrina.
"For many Americans, using a car for business purposes is not an option but a necessity," Coleman said in a statement. "As gas prices hit record levels, immediately increasing this year's standard mileage rates is more important than ever. Doing so will provide small businesses and working Americans with an important measure of relief."
The cost of gasoline has risen nearly 30% since November 2007 when the rate was last adjusted. The cost of gasoline is the largest factor in the establishment of the reimbursement rate, along with maintenance, depreciation, and insurance.
Nanny employers typically rely on the IRS rate to calculate reimbursement to the nanny when she either transports her charges or runs family errands using her personal automobile.
"For many Americans, using a car for business purposes is not an option but a necessity," Coleman said in a statement. "As gas prices hit record levels, immediately increasing this year's standard mileage rates is more important than ever. Doing so will provide small businesses and working Americans with an important measure of relief."
The cost of gasoline has risen nearly 30% since November 2007 when the rate was last adjusted. The cost of gasoline is the largest factor in the establishment of the reimbursement rate, along with maintenance, depreciation, and insurance.
Nanny employers typically rely on the IRS rate to calculate reimbursement to the nanny when she either transports her charges or runs family errands using her personal automobile.
Labels: nanny mileage reimbursement rate
Wednesday, June 11, 2008
e-Verify Expansion - An Executive Order
President Bush issued an executive order June 6, 2008, requiring all contractors doing business with the Federal Government to immediately begin utilizing the Department of Homeland Security-operated e-Verify system to verify the employment eligibility of all new hires. This order equally covers defense contractors, computer professionals, and the firms providing janitorial and cafeteria services to the US government.
e-Verify, jointly developed by DHS and the Social Security Administration, is a free Internet-based system that allows enrolled employers to confirm the legal status of new hires, typically instantaneously. HomeWork Solutions, the nation's leading provider of nanny payroll and nanny tax compliance services, recently announced an optional e-Verify verification service for its client's newly hired workers. HWS is the first "nanny tax" service to enroll as an e-Verify designated agent, allowing the firm to facilitate e-Verify compliance for its clients.
Meanwhile, on Capitol Hill, lawmakers are pondering an e-Verify compliance mandate applying to all US employers. The idea of e-Verify enjoys broad bi-partisan support. The devil, however, is in the details. There is some question as to which government agency - DHS or SSA - is better able to protect the privacy of the worker's data. Others question the timeliness and accuracy of results, and whether eligible employees will be rejected due to database errors.
Jonathan Scharfen, acting director of U.S. Citizenship and Immigration Services, testified yesterday before Congress and stated "E-Verify is the best available tool for employers to gain quick and easy verification information for their new hires." He reports that 99.5 percent of all people authorized to work are verified immediately. This is a substantial improvement over the 90% rate found in audits last year, with the improvement attributed to better access to databases.
In the last year, the states of Arizona, Colorado, Georgia, Idaho, Minnesota, Mississippi, Missouri, Oklahoma, Rhode Island, South Carolina and Utah have passed laws requiring companies in their states to confirm employment eligibility with E-Verify.
Link to HomeWork Solutions' June 1, 2008 e-Verify Service Announcement.
e-Verify, jointly developed by DHS and the Social Security Administration, is a free Internet-based system that allows enrolled employers to confirm the legal status of new hires, typically instantaneously. HomeWork Solutions, the nation's leading provider of nanny payroll and nanny tax compliance services, recently announced an optional e-Verify verification service for its client's newly hired workers. HWS is the first "nanny tax" service to enroll as an e-Verify designated agent, allowing the firm to facilitate e-Verify compliance for its clients.
Meanwhile, on Capitol Hill, lawmakers are pondering an e-Verify compliance mandate applying to all US employers. The idea of e-Verify enjoys broad bi-partisan support. The devil, however, is in the details. There is some question as to which government agency - DHS or SSA - is better able to protect the privacy of the worker's data. Others question the timeliness and accuracy of results, and whether eligible employees will be rejected due to database errors.
Jonathan Scharfen, acting director of U.S. Citizenship and Immigration Services, testified yesterday before Congress and stated "E-Verify is the best available tool for employers to gain quick and easy verification information for their new hires." He reports that 99.5 percent of all people authorized to work are verified immediately. This is a substantial improvement over the 90% rate found in audits last year, with the improvement attributed to better access to databases.
In the last year, the states of Arizona, Colorado, Georgia, Idaho, Minnesota, Mississippi, Missouri, Oklahoma, Rhode Island, South Carolina and Utah have passed laws requiring companies in their states to confirm employment eligibility with E-Verify.
Link to HomeWork Solutions' June 1, 2008 e-Verify Service Announcement.
Tuesday, June 10, 2008
Paying Nanny Under the Table - Potentially an Expensive Experience
Many families - 70 - 80% according to IRS estimates - choose to pay their nanny under the table. This 'saves' the family the approximately 10% premium on employment taxes, and maximizes the nanny's take home since she does not make the Social Security, Medicare, and income tax contributions that other US wage earners do.
Sounds like these families have found a money saving proposition, right? The true answer is maybe, and maybe not!
Nanny positions are, by their nature, not permanent positions. The children will grow, move on to preschool, kindergarten, elementary school. The family's child care needs change dramatically from full time, to part time, to after school or before school only. The full time nanny typically will have to move on after a few years, as they cannot live on the reduced income.
Nanny positions do not always end pleasantly - a family that suffers a job loss, for example, may dismiss the nanny without notice because they don't have the current income to support the nanny. Nanny may not live up to the family's standards and be similarly dismissed without notice or severance. Our 15 years of experience indicates that nanny job loss almost inevitably results in a trip to the local unemployment office and an application for benefits to tide the nanny over until the next job - irrespective of whether taxes were paid or not! Guess what? Nanny can receive these benefits even when you didn't report her income.
The Los Angeles Daily News recently interviewed accountants and tax experts and came to the same conclusion. California accountant Eva Rosenberg shared the experience of a client who fired their nanny, only to have the nanny file for unemployment benefits. The state assessed the family back taxes, penalties, interest and reported the family to the IRS.
Many parents do not realize that the expense can be offset - often entirely - by available tax incentives. A dependent care account, funded to the maximum $5000 annually, can reduce a family's tax burden by $2000 or more - offsetting the employment taxes on the first $20K they pay the nanny annually! If a dependent care account is not offered by one of the parent's employers, they can look to the Child Care Credit and a possible $1200 tax break. These tax incentives are not available to families who pay their nanny under the table!
There are solutions for the nanny tax paperwork readily available. For about $1 a day, families can outsource their nanny tax compliance paperwork to a firm like HomeWork Solutions Inc., a national nanny tax services company offering their services to families for 15 years. Full payroll and tax compliance services are as little as $2 per day! Peace of mind does not come with an expensive price tag!
Do you want to learn more about nanny tax compliance and 'getting right' with the IRS? Call 1-800-NaniTax (626.4829) and talk to Marcia or one of our other nanny tax specialists. They will be happy to walk you through your options and get you started down the road to nanny tax compliance.
Sounds like these families have found a money saving proposition, right? The true answer is maybe, and maybe not!
Nanny positions are, by their nature, not permanent positions. The children will grow, move on to preschool, kindergarten, elementary school. The family's child care needs change dramatically from full time, to part time, to after school or before school only. The full time nanny typically will have to move on after a few years, as they cannot live on the reduced income.
Nanny positions do not always end pleasantly - a family that suffers a job loss, for example, may dismiss the nanny without notice because they don't have the current income to support the nanny. Nanny may not live up to the family's standards and be similarly dismissed without notice or severance. Our 15 years of experience indicates that nanny job loss almost inevitably results in a trip to the local unemployment office and an application for benefits to tide the nanny over until the next job - irrespective of whether taxes were paid or not! Guess what? Nanny can receive these benefits even when you didn't report her income.
The Los Angeles Daily News recently interviewed accountants and tax experts and came to the same conclusion. California accountant Eva Rosenberg shared the experience of a client who fired their nanny, only to have the nanny file for unemployment benefits. The state assessed the family back taxes, penalties, interest and reported the family to the IRS.
"Since no payroll tax returns had ever been filed, there is no statute of limitations," Rosenberg said. "They can go back forever. It could be nasty."Parents commonly cite two overriding reasons for their tax evasion - the expense and the paperwork.
Many parents do not realize that the expense can be offset - often entirely - by available tax incentives. A dependent care account, funded to the maximum $5000 annually, can reduce a family's tax burden by $2000 or more - offsetting the employment taxes on the first $20K they pay the nanny annually! If a dependent care account is not offered by one of the parent's employers, they can look to the Child Care Credit and a possible $1200 tax break. These tax incentives are not available to families who pay their nanny under the table!
There are solutions for the nanny tax paperwork readily available. For about $1 a day, families can outsource their nanny tax compliance paperwork to a firm like HomeWork Solutions Inc., a national nanny tax services company offering their services to families for 15 years. Full payroll and tax compliance services are as little as $2 per day! Peace of mind does not come with an expensive price tag!
Do you want to learn more about nanny tax compliance and 'getting right' with the IRS? Call 1-800-NaniTax (626.4829) and talk to Marcia or one of our other nanny tax specialists. They will be happy to walk you through your options and get you started down the road to nanny tax compliance.
Labels: nanny tax avoidance, nanny tax compliance, nanny tax enforcement, nanny tax evasion
Monday, June 02, 2008
Calls Increasing for Employer Sanctions for Workplace Immigration Violations
The Immigration & Customs Enforcement (ICE) Division of the Department of Homeland Security has dramatically stepped up worksite enforcement efforts in 2008, part of a high profile effort to demonstrate that they are serious about enforcing immigration laws. Increasingly, critics are pointing out the inequity of arresting and deporting the non-documented workers, while letting the employers escape without penalty.
A recent May 16, 2008 raid at a kosher meat processor, Agriprocessors, in Iowa netted 389 arrests, one-third of the total work force. Currently 297 of those arrested have pled guilty and been sentenced, and will be deported.
Agriprocessors has a long history of irregularities in it's payroll reporting - in the period 2000 - 2005 the Social Security Administration notified Agriprocessors via 5 different 'no-match' letters of 500 instances of Social Security Number - Name mis-matches. Critics argue that the company and its officers were knowingly in violation of immigration law, as demonstrated by an 8 year pattern of hiring and retaining workers who presented false documents. Court documents filed by Immigration and Customs Enforcement (ICE) prior to the raid indicate that Quarter 4-2007 payroll records show that 78% of the workforce was working with a false Social Security Number. Why, critics ask, are the employers not prosecuted as aggressively as the workers?
The Department of Homeland Security, in conjunction with the Social Security Administration, has developed an electronic I-9 screening system, e-Verify, to assist employers in the verification of legal work status of newly hired employees. HomeWork Solutions is an e-Verify registered agent and can now perform these verifications on behalf of its 'nanny tax' compliance clients.
A recent May 16, 2008 raid at a kosher meat processor, Agriprocessors, in Iowa netted 389 arrests, one-third of the total work force. Currently 297 of those arrested have pled guilty and been sentenced, and will be deported.
Agriprocessors has a long history of irregularities in it's payroll reporting - in the period 2000 - 2005 the Social Security Administration notified Agriprocessors via 5 different 'no-match' letters of 500 instances of Social Security Number - Name mis-matches. Critics argue that the company and its officers were knowingly in violation of immigration law, as demonstrated by an 8 year pattern of hiring and retaining workers who presented false documents. Court documents filed by Immigration and Customs Enforcement (ICE) prior to the raid indicate that Quarter 4-2007 payroll records show that 78% of the workforce was working with a false Social Security Number. Why, critics ask, are the employers not prosecuted as aggressively as the workers?
The Department of Homeland Security, in conjunction with the Social Security Administration, has developed an electronic I-9 screening system, e-Verify, to assist employers in the verification of legal work status of newly hired employees. HomeWork Solutions is an e-Verify registered agent and can now perform these verifications on behalf of its 'nanny tax' compliance clients.
Nanny Tax Service Offers e-Verify Service
HomeWork Solutions Inc., nationally recognized household payroll experts since 1993, is pleased to announce the addition of e-Verify compliance to its "Nanny Tax" payroll and tax compliance services.
"Many of the employers of nannies, housekeepers, and other domestic staff could suffer serious consequences, should they hire a household worker who is ineligible for US employment," reports HomeWork Solutions' Kathleen Webb. "Most household employers are not familiar with the myriad immigration documents that can confer employment authorization and are anxious to insure that they remain compliant with both employment tax and immigration law."
