Nanny Holiday or Year End Bonuses
Q. How big of a holiday bonus will my nanny expect?
A. Holiday or year end bonuses are OPTIONAL - approximately half of our clients report paying end of year bonuses. The amount is typically one, sometimes two weeks pay. For newer nannies, most families fall back on the one day for every month of employment, up to a week. So the nanny who started in October might get 3 days pay as her bonus.
Many families have employment contracts that obligate a bonus at the employment anniversary date - a retention bonus. When these arrangements are in place, there is often either no holiday bonus or a very modest one.
Q. Due to current economic conditions, I cannot afford the size bonus I paid last year. How do I handle that?
A. Your nanny hears the news too. Most employees, not simply nannies, have adjusted their expectations downward, and most are happy to get any bonus. I recommend that you acknowledge this to your nanny. Something to the effect "Times are rough, and I wish this bonus could be as generous as last year's." Make sure you use the words to express your gratitude for the services your nanny provides; most professional nannies would agree that a financial bonus is nice, but the words sincerely offered are always remembered.
Q. Are nanny holiday bonuses and gifts taxable?
A. Yes. Basically, according to the IRS, there is no such thing as a GIFT between and employer and an employee. Anything of value given by an employer to an employee is considered compensation, subject to reporting and employment and income taxes.
The only way to skirt the issues of reporting the gift or bonus on the nanny's W-2 is to give her something with a 'de minimis' value - something so small that it is administratively impractical to perform a valuation and include it in compensation. This absolutely rules out CASH and dollar-value gift cards, but might allow other small expressions of gratitude such as a framed photo of the nanny with her charges.
The IRS does not define 'de minimis' by any specific value. A business gift is considered 'de minimis' if the value is less than $25. Many employers use the same measurement - hence the holiday ham or turkey. Gift cards with a dollar value or 'cash equivalent', however, even under $25, would be considered compensation.
Any cash you give to an employee at any time - whether it's a salary, bonus, or holiday gift - must be added to the employee's W-2 income. As a cash equivalent, a $50 gift certificate or gift card is $50 of taxable income.
A. Holiday or year end bonuses are OPTIONAL - approximately half of our clients report paying end of year bonuses. The amount is typically one, sometimes two weeks pay. For newer nannies, most families fall back on the one day for every month of employment, up to a week. So the nanny who started in October might get 3 days pay as her bonus.
Many families have employment contracts that obligate a bonus at the employment anniversary date - a retention bonus. When these arrangements are in place, there is often either no holiday bonus or a very modest one.
Q. Due to current economic conditions, I cannot afford the size bonus I paid last year. How do I handle that?
A. Your nanny hears the news too. Most employees, not simply nannies, have adjusted their expectations downward, and most are happy to get any bonus. I recommend that you acknowledge this to your nanny. Something to the effect "Times are rough, and I wish this bonus could be as generous as last year's." Make sure you use the words to express your gratitude for the services your nanny provides; most professional nannies would agree that a financial bonus is nice, but the words sincerely offered are always remembered.
Q. Are nanny holiday bonuses and gifts taxable?
A. Yes. Basically, according to the IRS, there is no such thing as a GIFT between and employer and an employee. Anything of value given by an employer to an employee is considered compensation, subject to reporting and employment and income taxes.
The only way to skirt the issues of reporting the gift or bonus on the nanny's W-2 is to give her something with a 'de minimis' value - something so small that it is administratively impractical to perform a valuation and include it in compensation. This absolutely rules out CASH and dollar-value gift cards, but might allow other small expressions of gratitude such as a framed photo of the nanny with her charges.
The IRS does not define 'de minimis' by any specific value. A business gift is considered 'de minimis' if the value is less than $25. Many employers use the same measurement - hence the holiday ham or turkey. Gift cards with a dollar value or 'cash equivalent', however, even under $25, would be considered compensation.
Any cash you give to an employee at any time - whether it's a salary, bonus, or holiday gift - must be added to the employee's W-2 income. As a cash equivalent, a $50 gift certificate or gift card is $50 of taxable income.
Labels: nanny bonus, nanny holiday bonus, nanny year end bonus
posted by Kathleen Webb at
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