Nanny Tax Calculator Updated!

2009 Stimulus Plan Federal Withholding Rates Available

The HomeWork Solutions' Nanny Tax Calculator is updated to reflect the new Federal income tax withholding rates that become effective April 1, 2009.

The new withholding rates will be automatically implemented for HomeWork Solution's full service payroll clients (NaniPay) and no action is needed by these clients. NaniPay clients have their household employee's payroll direct deposited into their employee's bank account by HomeWork Solutions.

HomeWork Solutions' clients who pay their household worker directly (nanny, housekeeper, companion, maid, etc.) AND withhold income taxes may recalculate their worker's net payroll and begin making the revised payments at any time, preferably no later than the 1st payroll date in April 2009.

HomeWork Solutions' clients who pay their household worker directly must advise HomeWork Solutions of the date they will first pay the new net check amount.

Instructions:
1. Log into your account at the 4nannytaxes.com website.

2. Select Calculate Paycheck for each employee.

3. Select Calculation based on Tax Year: 2009 Apr. - Dec.
The calculator will default with the current gross wage and withholding status of the employee. Verify defaults, and select Calculate Payroll Taxes. You will be shown the complete breakdown of employee withholding amounts, which we recommend you print for your employee's records.

4. To notify HWS of the effective date of the new net payment amount, from the site navigation, return to Member Area. Click on the employee's name, and update the fields Effective Date and Net Pay and SUBMIT.

New Nanny Federal Income Tax Withholding Rates

President Obama announced over the weekend that the new Federal income tax rates reflecting the $400/person tax cut in the stimulus bill, will become effective April 1, 2009.

HomeWork Solutions will have the new rates available on our website's Nanny Tax Calculator no later than Friday February 27, 2009. A nanny's Federal income taxes will go down approximately $10/week on average through December 2009. They will nudge back up a bit in 2010. Long time employers will recall that we had a similar mid-year withholding adjustment in 2002 when the Bush tax cuts were enacted.

Nanny employers who make a predictable weekly or periodic payment to the nanny are advised that they should continue paying with their current net calculation through the end of the 1st quarter (3/31/2009) and begin making new net check payments effective the first pay period in April 2009.

Your Nanny's Paycheck and the Stimulus Package...

We are already being asked for specifics on the stimulus package and how it will change payroll withholding and the ink isn't dry yet on President Obama's signature!

The key provision, Making Work Pay, is a $400 per person/$800 per family tax break that is intended to increase the size of your paycheck NOW to help stimulate the economy. There are income limitations, but most nannies will be covered by this.

There are NO published guidelines or time lines right now. Speculation in the payroll community is that new withholding tables will be published in March, with an April start to the new withholding rates. We are on top of it, there is simply nothing definitive to report right now.

If this does go into effect April 1, you will see an approximate $10/week reduction in Federal income tax withholding.

Nannies with children who qualify for the Earned Income Credit may see a change in those calculations too. The EIC is a tax credit, sometimes referred to as a "negative income tax" that is refundable.

Nannies: Identity Theft Warning

Identity thieves posing as the Internal Revenue Service are sending spam emails promising government economic stimulus packages. They prompt the user to download an attachment and fill in their personal information for the IRS to send their check. On popular social networking sites frequented by nannies such as Facebook, advertisers are promising 'economic stimulus grants.' All you need to do is fill in a form, including your name, address, and date of birth. You pay for shipping and handling with your credit card.

The IRS reports "This appears to be an identity theft scheme to obtain recipients' personal and financial information so the scammers can clean out their victims' financial accounts." The IRS will NOT send you an email looking for any personal identifying information. There is no 'economic stimulus grant' program. Please be very careful about all requests for personal identifying information - these are almost always identity thieves looking for a new victim.

More information: http://www.irs.gov/newsroom/article/0,,id=178061,00.html

Nannies: Payment Upon Termination

The very challenging economic climate we find ourselves in has some predictable effects on nanny payroll. Many nanny employers, when faced with a job loss or income reduction, need to take immediate steps to change their household expenses, and firing the nanny is often an unfortunate consequence.

When the employee (nanny) is involuntarily discharged, the timing of final wage payments is governed by state law. California for example requires that the discharged nanny be paid all wages due immediately at the time and place of discharge. The District of Columbia, Illinois and New York (and many other states) require that all wages to the discharged nanny be paid no later than the next business day.

Many employers (and the terminated employee) overlook important details in the stress of the moment. The following are some recommended best practices at the time of termination:

1. Try to deliver the news in a private, neutral setting without the children present. People do not always react well to an involuntary discharge - there may be tears, anger, or any manner of emotional response - from either one of you!
   
2. Have the employee's final paycheck available at the time of the discussion. At a minimum this should include wages through the date of discharge. Many families add an additional severance payment - this is discretionary under U.S. law, but may be obligated under your work agreement. If you utilize a payroll company, call them first. Their staff will help you calculate the amount of the final payroll and wrap up the administrative details.
3. Many discharged nannies are losing their job due to circumstances totally unrelated to their performance. Have a suitable letter of recommendation prepared and provide to the nanny; offer to provide a telephone reference to any prospective employer.
   
4. Many nannies have employer property, especially household keys, car seats and strollers in their possession. The return of this property should be dealt with at this time.
5. Provide the discharged nanny with information on how to file an unemployment insurance claim - these notices to employees are available to download from your state's Department of Labor website.
6. Consider having a formal "Employee Final Release" document, or separation agreement, prepared for both of your signatures. This document should include the family and the nanny's name, the date of separation, and a release of claims by both parties (employee to wages, employer to 'company' property returned). Legally Nanny is a reputable resource for professional assistance in drafting this document.
   
7. Review your confidentiality agreement. A well written agreement survives the employment relationship and this is the appropriate time to point that out.

My final advice is to follow the Golden Rule. A nanny who has provided good and faithful service to your family and is undoubtedly very attached to your children should be afforded the opportunity to say her good byes. This may be at a future date however, depending on the nanny's emotional state. Coming by the following weekend to share a pizza with the children may be a better option to an immediate leave taking, allowing everyone involved to regain their composure and keep the children's needs as the primary consideration.

Nanny Question: What do I do - I didn't get a W-2?

It is tax time again, and the inquiries from nannies who did not receive a Form W-2 from their employer are coming in. This happens most frequently when the nanny is no longer employed by the family. The following are some tips and steps to take.

• Form W-2 is due January 31 (February 2 this year because the deadline was a weekend). The IRS specifically asks that you allow the employer until February 15 before you report it missing. The January 31 date is the 'mail by' date.

• It is February 15 and you still do not have a W-2. First step is to phone the employer. Often the nanny has moved and the employer does not have a valid mailing address. Allow two additional weeks if you needed to update your address for the employer to obtain/generate a replacement.

• The employer does not intend to give you a W-2 or intends to provide a 1099. The next step is to remind the employer that as a nanny you are entitled to a Form W-2. The employer is responsible to remit the Social Security and Medicare taxes, as well as pay unemployment insurance. The employer is NOT responsible for the nanny's income taxes unless it was agreed to in the written work agreement (rather rare). The IRS Publication 926 is a point of reference to reinforce this.

• Phone Support from the IRS. The IRS encourages employees in this situation to phone 1-800-829-1040 for guidance. In our experience, you will be told the same information as what is contained here, and wait on hold a VERY long time to get this information!

• The employer still refuses to provide the W-2 Form. HomeWork Solutions provides detailed instructions on the steps the nanny should take, including samples forms to act as a guide.

W-2 Deadline TODAY!

The W-2 forms due to your 2008 employees should either be in their hands or postmarked by today, February 2. Typically the deadline is January 31. However, when January 31st falls on a weekend, the next business day becomes the due date.

You must also file copies with the Social Security Administration. These are sent in later - by February 28 (March 2 this year because February 28 falls on a weekend).

Any nanny, housekeeper or maid who earned $1600 or more from a family in 2008 should be furnished a W-2 form.