Common Nanny Tax Questions
Nannies and employers have been asking a few common questions over and over again in the last month. I will take a few moments to address here. Remember, there are very thorough answers in our online FAQ.
1. I had a falling out with my boss and left my nanny job without notice. I received a text from my employer, a lawyer, asking for my mailing address so she could "1099" me. Isn't she supposed to give me a W-2? What does this mean?
Nannies are employees of the families that they work for. As such, they are subject to employment taxes. Employment taxes are paid to the government by the employer, and the employer is entitled to deduct some of these taxes from your paycheck. If the employer does not deduct, THEY remain responsible for paying. YOU are responsible for your income taxes.
Your employer is legally obligated to provide you a W-2 form no later than January 31, 2010 for your 2009 employment.
2. I agreed to work for a family for cash - under the table. We agreed on a rate knowing that no taxes would be deducted or reported. My boss has been collecting money from a FLEX account and now knows she has to pay taxes and report my income. What does this mean to me?
When you agree to work under the table both you and your employer are agreeing to violate tax law, and there can be consequences to both of you if you are caught. Fortunately for you, it sounds like this can be rectified in a timely manner assuming this is 2009 income that your are referring to.
Your employer will need to give you a W-2 that documents the wages you were paid. She will file this with the Social Security Administration. She will have to pay the IRS the Social Security and Medicare taxes on your wage, and will likely need to pay unemployment taxes too. Your W-2 will show that NO income tax was deducted from your wage; this is legal in household employment. You will need to complete an annual income tax return to calculate the amount of tax due, if any, and make your payment to the IRS. Don't ignore the W-2 - the IRS will know you received one and will catch up with you sooner, rather than later. Enforcement is always stepped up when their are budget deficits and government programs awaiting funding.
3. I hired a foreign nanny who is here legally on a visa but she doesn't have a Social Security Card. What do we do about the taxes?
There are two possible scenarios at play here. The first is that your nanny is both legally present and legally authorized to work in the U.S. and is simply awaiting her SSN. If that is the case, the situation will resolve in about 6 - 8 weeks as that is the typical turn around time for a Social Security Number application. You need to report all income and pay all taxes from the date she starts, whether she has the number yet or not. Depending on your state taxing authority, you may incur a small penalty on your first filing if this number is not included.
The second possible scenario is that your nanny is legally present (has a visa) but does not have authorization to work in the U.S. By hiring her you are both in violation of U.S. law. You the employer are only permitted to hire citizens, permanent residents, or legal non-immigrants with a valid work visa. She too is violating her visa. This is a somewhat common occurrence with foreign students admitted to the U.S. to pursue university studies. You will have all of the employment tax obligations of an employer - the IRS does not care if your nanny is legal or not. Your nanny will file a W-7 application for a Individual Taxpayer ID Number (ITIN) with her first tax return (usually a 1040NR) and be issued an identifying number by the IRS. Therefore, for the first year all of your filings will be missing a SSN/ITIN, but in future year filings you will be able to utilize her ITIN for tax payment purposes.
1. I had a falling out with my boss and left my nanny job without notice. I received a text from my employer, a lawyer, asking for my mailing address so she could "1099" me. Isn't she supposed to give me a W-2? What does this mean?
Nannies are employees of the families that they work for. As such, they are subject to employment taxes. Employment taxes are paid to the government by the employer, and the employer is entitled to deduct some of these taxes from your paycheck. If the employer does not deduct, THEY remain responsible for paying. YOU are responsible for your income taxes.
Your employer is legally obligated to provide you a W-2 form no later than January 31, 2010 for your 2009 employment.
2. I agreed to work for a family for cash - under the table. We agreed on a rate knowing that no taxes would be deducted or reported. My boss has been collecting money from a FLEX account and now knows she has to pay taxes and report my income. What does this mean to me?
When you agree to work under the table both you and your employer are agreeing to violate tax law, and there can be consequences to both of you if you are caught. Fortunately for you, it sounds like this can be rectified in a timely manner assuming this is 2009 income that your are referring to.
Your employer will need to give you a W-2 that documents the wages you were paid. She will file this with the Social Security Administration. She will have to pay the IRS the Social Security and Medicare taxes on your wage, and will likely need to pay unemployment taxes too. Your W-2 will show that NO income tax was deducted from your wage; this is legal in household employment. You will need to complete an annual income tax return to calculate the amount of tax due, if any, and make your payment to the IRS. Don't ignore the W-2 - the IRS will know you received one and will catch up with you sooner, rather than later. Enforcement is always stepped up when their are budget deficits and government programs awaiting funding.
3. I hired a foreign nanny who is here legally on a visa but she doesn't have a Social Security Card. What do we do about the taxes?
There are two possible scenarios at play here. The first is that your nanny is both legally present and legally authorized to work in the U.S. and is simply awaiting her SSN. If that is the case, the situation will resolve in about 6 - 8 weeks as that is the typical turn around time for a Social Security Number application. You need to report all income and pay all taxes from the date she starts, whether she has the number yet or not. Depending on your state taxing authority, you may incur a small penalty on your first filing if this number is not included.
The second possible scenario is that your nanny is legally present (has a visa) but does not have authorization to work in the U.S. By hiring her you are both in violation of U.S. law. You the employer are only permitted to hire citizens, permanent residents, or legal non-immigrants with a valid work visa. She too is violating her visa. This is a somewhat common occurrence with foreign students admitted to the U.S. to pursue university studies. You will have all of the employment tax obligations of an employer - the IRS does not care if your nanny is legal or not. Your nanny will file a W-7 application for a Individual Taxpayer ID Number (ITIN) with her first tax return (usually a 1040NR) and be issued an identifying number by the IRS. Therefore, for the first year all of your filings will be missing a SSN/ITIN, but in future year filings you will be able to utilize her ITIN for tax payment purposes.
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posted by Kathleen Webb at
8:07 AM
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