Nanny tax may come back to bite

THE FACTS:

• A nanny taking care of your children in your home – whether full or part time – is your employee.
• If you pay your nanny more than $1,500 a year, you are required to withhold and pay Social Security, Medicare and unemployment taxes.
• If the IRS discovers that the income has not been filed and taxes have not been paid, the employer could be on the hook for the taxes, disability and unemployment. For a nanny making $600 a week, the social security taxes alone would add up to about $25,000 over five years, and that doesn’t include penalties and interest.
• Most nanny tax evasion is caught as part of a larger audit, or when a nanny is fired or hurt on the job and goes to the state for compensation.

Sources: Internal Revenue Service; Daily News research

SITES:
www.irs.gov/publications/p926/index.html (Household Employers Tax Guide)
www.nannynetwork.com/NannyTax/index.cfm
www.4nannytaxes.com