Barbara Correa writes about work and family for the Los Angeles Daily News.Nanny tax may come back to bite
Here's my article about the nuts and bolts of the nanny tax.
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