New Tax Amnesty Programs

We have reported on several state tax amnesty programs this year. Add Delaware, Vermont and Oregon to the list of states offering tax amnesty programs hoping to bring in desperately needed tax revenue with the promises of penalty and/or interest forgiveness.

The Delaware amnesty program runs September 1, 2009 to October 30, 2009 and does not appear to include delinquent employer withholding taxes or unemployment insurance tax and does include personal income tax. Oregon's tax amnesty program also excludes employer withholding and unemployment insurance taxes. Oregon's program runs October 1, 2009 through November 19, 2009 and does not include the 2008 or 2009 tax years.

Vermont's tax amnesty program does include personal income and employer withholding taxes, and excluded unemployment insurance taxes. Vermont's program runs July 20, 2009 through August 31, 2009.

Advice When You Need to Let the Nanny Go

Nanny jobs are not forever. The reasons for letting the nanny go vary. The children grow up and your beloved family nanny is no longer needed. Perhaps the nanny has horrible work habits - always late or a frequent 'no show.' Your family and the nanny simply may not 'click.' The nanny who was a wonderful nurturer of your infant does not have the energy to deal with your demanding toddler. Whatever the reason, firing a nanny can be an uncomfortable experience for both family and nanny.

Below are some tips and best practices when letting the nanny go.

1. Be compassionate: It is best to break the news at the end of a work day and away from the children.
   
   
2. Don't draw out the conversation: Short and simple are the best way to deliver the news.
   
   
3. Notice: : If you have a written work agreement, you will most likely have a notice provision already agreed to. Adhere to it. If you require x weeks of notice from the nanny, be sure you return the courtesy, or provide pay in lieu of the notice.
   
4. Letter of Recommendation: When you are separating on amicable terms, please consider writing a letter of recommendation, and making yourself reasonably available for telephoned reference checks.
   
   
5. Taxes: You nanny may be eligible for unemployment compensation from your state fund. This is true even if you were not properly reporting her wages to the state!
   
   
   What if you were paying under the table? The state unemployment agency will look back at the last one - two years of the nanny's employment. If you did not report/pay your unemployment taxes, you will be subject to administrative action, including reporting to the IRS, and may be charged with the entirety of the nanny's unemployment benefits. Unemployment insurance (tax) for the full time nanny averages $300- 400 a year - when paid on time. A nanny's benefits may be $200 - 300 per week for up to 39 weeks. That could be $8000- 12000 directly charged to you for failure to pay the requisite employment taxes.
   
   
   
6. Security & Family Property: Request that nanny at the time of separation return all house and car keys, as well as any remote devices.
   

Download the Complete 10 Tips: How to Fire the Nanny

US Minimum Wage Increases to $7.25 an Hour July 24

The federal minimum wage increases to $7.25 an hour, effective July 24, marking the third and final increase scheduled from legislation signed by President George Bush in 2007.

More than a dozen states will increase minimum wages July 24 to match the federal minimum wage increase: Delaware, Idaho, Indiana, Maryland, Missouri, Montana, Nebraska, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Virginia, and Wisconsin. The District of Columbia sets its minimum wage at the federal minimum rate plus $1, bringing the rate to $8.25, effective July 24. Ohio's minimum wage for nanny employers will remain at $7.30 an hour - there are statewide increases for larger employers only.

The state minimum wage increased in Illinois, Kentucky, and Nevada effective July 1, 2009:

• Illinois, $8 an hour, from $7.75.


• Kentucky, $7.25 an hour, from $6.55.


• Nevada, $6.55 an hour for employees with qualifying health benefits, from $5.85; and $7.55 an hour for all other employees, from $6.85.

The weekly stipend for a typical au pair will also increase July 24 to $195.75. Specialty classes of au pairs may increase more - refer to your contract. Remember, while no employment taxes (Social Security, Medicare, or Unemployment) are due on the au pair stipend, it is subject to Federal Income Tax and most au pairs do have a Federal income tax obligation.

IRS Warning: Check Your Withholding Satus

Nannies who are married, in a nanny share, or have more than one job take note: The Internal Revenue Service is reminding individual taxpayers to check their 2009 federal income tax withholding levels to ensure there are no surprises when filing returns next spring. Because the Making Work Pay credit lowered tax withholding rates this year for 120 million American households, taxpayers should ensure that enough tax is withheld if they are among these groups: multiple job holders, families with both spouses working, workers who can be claimed as dependents by other taxpayers, and pensioners. Failure to adjust withholding could result in taxes owed or smaller refunds, IRS said.

If a nanny is married and both spouses work and both spouses had their withholding tax adjusted, they are being credited for 150% of the available credit - and may be surprised to owe several hundred dollars at the end of the year. If you work two or more jobs and have withholding from each, you may be being under-withheld because each job treats your withholding tax calculation as if you are working only for them. Nannies in a nanny share have to be particularly vigilant that both jobs are taking into account your TOTAL income, not just the portion they pay individually, when calculating your withholding.

Remember, withholding tax calculations are simply estimates. You true tax calculations depend on many factors other than your income and marital status.

The IRS withholding calculator at IRS.gov and Publication 919, How Do I Adjust My Withholding?, can help a taxpayer compute the proper tax withholding.

Let's Talk About Nanny Screening

Ask any parent hiring a nanny and of course they will tell you that pre-screening the nanny is terribly important. Many parents engage nanny agencies to help with their nanny search so they have someone responsible for the screening process. Increasingly, in these tough economic times, parents are turning to online resources to locate nannies, or depending on neighborhood word of mouth. When that happens, the parents are 100% responsible for all nanny screening, despite some online claims to the contrary.

What exactly is nanny pre-screening? Definitions will vary between agencies and families. In general, the following will apply:

1. Thorough interviewing. This is when you verify all of your non-negotiable items, such as nanny needs a driver's license, nanny must be CPR certified, nanny must swim, nanny must cook - this list is unique to each family. In person interviewing in a neutral public location is strongly recommended. Don't interview in your home until you have met the nanny at least once. The in person interview is also a good time for you both to assess your "match" - do you click? If you don't feel you could work with the person, move on.

2. Verify Identity. Ask to see a government issued photo ID at the in person interview, and request that the candidate show you proof of authorization to work in the United States. This can be a US Social Security Card, a US Passport, a green card, or a visa with work authorization - double check the name and photo match the candidate. If not certain what documents to accept, download the DHS Form I-9 and instructions.

3. Thorough reference checking. You should try for a minimum of 3 non-related references - friends and family are not acceptable. For the younger candidate, you may speak to a school guidance counselor, pastor, youth group leader, etc. References who have observed the candidate working with children are the best.

4. Purchase a background check. Pre-employment background checks are regulated by the Fair Credit Reporting Act (FCRA) and require that the candidate provide you with a signed authorization to release the report to the hiring family. Generally a conditional offer of employment has been extended and accepted before you go to this step. Absolutely do an address verification, obtain criminal background checks in each county the candidate has lived in for the last 7 years, national sex offender database check (U.S. Department of Justice is the best source), and a driving records search if the nanny will be required to drive.

Some families will ask for a credit check of the nanny. Reputable background screening companies cannot provide this too you. If it is terribly important you may ask the candidate to order the credit report and provide to you - consider covering the expense. Be warned, however, that many candidates feel that a credit check is unreasonably intrusive on the part of a potential employer and will walk away from the job.

The last step is to document the employment agreement - a written work agreement makes sure everyone is on the same page regarding hours, benefits, compensation, taxes, confidentiality, duties and the like.

Families are feeling the squeeze in this economy. We urge you not to cut corners in nanny screening - your children depend on your due diligence. Background checks provided by our affiliate 4nannies.com are FCRA compliant and return results in 2 - 3 business days. The International Nanny Association publishes standards for nanny screening - if you use an agency ask them if they adhere 100% to these standards. For your own records, request that the agency provide you a copy of the pre-employment screening report too.

Other Resources
10 Tips: Effective Nanny Screening
10 Tips: Common Nanny Hiring Mistakes

Yesterday, Washington. Today, Tennessee

The Tennessee General Assembly has passed a retroactive tax increase on all Tennessee employers, designed to keep the state's unemployment tax fund solvent in the current recession.

Tennessee will now apply unemployment tax to the first $9000 of wages paid to each employee, up from $7000. This will increase the unemployment tax paid by employers by an average of $60 per employee.

Additionally, a surcharge of .6% will be applied to most employers, increasing the cost per employee an additional $54.

This is retroactive to January 1, 2009. Employers who report and pay the additional amounts due on or before July 31, 2009 will not be assessed late payment penalties.

Washington State Stops Certifying Paper Tax Returns

Washington State notified all registered 3rd party payroll preparers late Wednesday, July 1, 2009 that they will no longer certify paper tax returns prepared by third parties, effective immediately. The "certification" process in the past guaranteed that paper tax returns prepared by enrolled third party preparers, such as HomeWork Solutions, would be processed by the state without risk of 'wrong form' penalties when the optical scanning process failed.

This clearly poses problems for ALL payroll providers in Washington State, as the notice was posted AFTER the Second Quarter closed.

HomeWork Solutions will provide ALL Washington State clients with online filing/reporting instructions for their state household employment taxes. Clients who have already been mailed paper reports will be notified via email of this change. Effective immediately, HomeWork Solutions will only prepare online filing instructions and calculations for clients. If you desire to report via paper form, you may contact the state at taxforms@esd.wa.gov, provide your State Unemployment Account number, and request that a paper form be generated and mailed to you. Upon receipt, you will need to hand complete with employee SSN, name, wage, and tax amounts and mail to the state with a check.

We regret the inconvenience and request your patience as we deal with this change beyond our mutual control.