We receive a LOT of questions from families about household employer taxes. Am I considered an employer? Am I required to pay taxes for my caregiver? How much are they?  All great questions.  The general answers are that people who pay a nanny or other caregiver to perform duties in or around their home ARE considered household employers and are required to pay taxes for their employee(s) if you pay that person $1,700 (2011) or more in a calendar year.  

The great news is that by taking advantage of tax breaks such as Dependent Care Accounts / Flexible Spending Accounts and Child and Dependent Tax Breaks, families can often offset or even exceed their nanny tax payments. That means that by paying taxes legally, families can often actually save money!

Here are some resources and information related to household employer taxes that help shed some light on the benefits and requirements of paying taxes for household employees.

• FREE Nanny Tax Calculator provided by our partners, Breedlove & Associates.
  
  
• Are nanny taxes affordable? Tax breaks and other benefits of compliance.
  
  
• Wondering if you're considered a household employer.  Check out: Who is a household employer?
  
  
• Learn more about Employer Tax Responsibilities.
  
  

We receive a lot of inquiries this time of year about holiday bonuses. The two most common questions we hear are: “What is the standard amount to give?” and “Is it taxable?”

To answer the first question, traditionally, holiday bonuses are between 1 to 2 weeks salary. If you can’t afford to provide 1-2 weeks salary, gifts such as a restaurant or spa gift card or a small token cash amount let your nanny know you appreciate her without breaking the bank. Additionally, since your relationship with your nanny is personal, the ultimate decision of what you give and how much you are comfortable giving, is up to you.

For the second question, we turned to our friends at Breedlove & Associates, the industry leader in household employer taxes and payroll services. Breedlove advises that, “All bonuses and gifts are considered taxable compensation and by law must be handled like standard wages. Therefore, families should assume that their total cost of providing a bonus will be the bonus amount plus approximately 10%.  For example, a $500 bonus would result in a total employer cost of about $550.” If you have any further tax related questions on this topic, please feel free to contact Breedlove at 888-273-3356.

Do you give your nanny or household employeee a holiday bonus? Is it in addition to or in lieu of an actual gift? We'd love to hear your thoughts.

Today is a huge step and victory for nannies and other household employees in the State of New York. That's because the Domestic Workers' Bill of Rights in New York takes effect today, November 29, 2010. Per the New York Department of Labor, among other benefits, the new law will entitle nannies and other domestic employees with the following rights:

• The right to overtime pay at time-and-a-half after 40 hours of work in a week, or 44 hours for workers who live in their employer’s home;
• A day of rest (24 hours) every seven days, or overtime pay if they agree to work on that day;
• Three paid days of rest each year after one year of work for the same employer; and
• Protection under New York State Human Rights Law, and the creation of a special cause of action for domestic workers who suffer sexual or racial harassment.

For full details on the Domestic Workers' Bill of Rights, please visit the website for the New York Dept. of Labor.

The State of New York is the first state to pass such a bill into law. Should other states follow in New York's footsteps? What are your thoughts?

We receive a LOT of questions from families about household employer taxes. Am I considered an employer? Am I required to pay taxes for my caregiver? How much are they?  All great questions.  The general answers are that people who pay a nanny or other caregiver to perform duties in or around their home ARE considered household employers and are required to pay taxes for their employee(s) if you pay that person $1,700 (2010) or more in a calendar year.  

The great news is that by taking advantage of tax breaks such as Dependent Care Accounts / Flexible Spending Accounts and Child and Dependent Tax Breaks, families can often offset or even exceed their nanny tax payments. That means that by paying taxes legally, families can often actually save money!

Here are some resources and information related to household employer taxes that help shed some light on the benefits and requirements of paying taxes for household employees.

Well, just last week, the New York State Senate passed a bill that would require such benefits as paid holidays, sick days, vacation days, overtime wages and either 14 days notice of termination or severance pay before families can fire their domestic employee. This bill is currently being “reconciled” against a similar bill passed last year and lawmakers expect New York Governor David Paterson to sign what is being proclaimed the nation’s first workplace protection for domestic employees. If signed, this new law is expected to affect an estimated 200,000 workers in New York, including illegal immigrants.

Is this bill long over due and should other states follow suit? What types of effects will this law have on a family’s ability to afford a nanny or domestic employee? Does your family already offer these benefits? Should workplace protection be extended to illegal immigrants? We’d love to hear thoughts from both families and nannies.

See “For Nannies, Hope for Workplace Protection" by Russ Buettner

You've found your ideal caregiver.  Now what???  Here's an easy-to-follow hiring checklist so you can be sure not to miss a beat. 

• Screening Done?    Be sure you've performed ALL our recommended screening steps.  These screening steps are the most important factors in making a successful hire!
  
  
• Payroll & Taxes?    Inquire about payroll and taxes and find ways to save both time and money.  Services include tax filing, direct deposit, and more.
  
  
• Required forms?    Be sure you and your new caregiver complete the required hiring forms, including the Employment Eligibility Verification (I-9) and the Form W-4.
  
  
• Employment Agreement   GoNannies recommends having your new caregiver sign an Employment Agreement to minimize the potential for any misunderstandings now or in the future.
  
  
• Training    Invest some time training.  While there's much that an experienced caregiver will already know, there are always new aspects to any new position and the caregiver deserves some direction that will help them get started on the right foot.
  
  
• Post-hire Screening    Don't forget that screening should still take place AFTER the hire. Drop in unannounced, consider a mutually beneficial nanny-cam, communicate and evaluate regularly!  Call us to learn more.

Happy Hiring!

We get a lot of questions toward the end of each year about tax breaks and how to catch up on paying taxes.  Below are answers to those questions from Breedlove & Associates, the industry leader in household employer tax and payroll services. 

Ask the Tax Expert: Year-End Nanny Tax Breaks
By Stephanie Breedlove, founder of Austin-based Breedlove & Associates, the nation’s leader in tax & payroll services for household employers

Question: I hired a nanny in September. Are there any tax breaks I can take advantage of this year?

Answer: Yes, there are two tax breaks available to household employers – but they are only available to you if you filed quarterly tax returns to the state and IRS. If you have not been paying legally in 2009 and you’d like to get caught up, call us and we can walk you through the process (this is a very common occurrence since most people want to do the right thing and just get busy and forget).

Once you’re caught up and compliant, you’ll be able to take advantage of the Child or Dependent Care Tax Credit. If you have one dependent, the tax credit will save you $600; if you have two or more dependents, you’ll save $1,200.

Good News! Congress is currently considering bills that would update the expense limits and therefore increase these savings dramatically. Experts predict that the savings will change to $2,100-$3,000 for families with one dependent and $4,200-$6,000 for families with two or more dependents. This savings will be available each and every year – providing welcome financial relief for working families.

The other tax break is the Dependent Care Account (a.k.a. “Flexible Spending Account”) which is a federal benefit program offered through companies. If you’re already enrolled at your office, you are able to immediately take advantage of this tax break on any 2009 qualified childcare expenses. The Flexible Spending Account typically saves household employers between $2,100 and $2,300 per year, regardless of the number of dependents. If you are not enrolled, we encourage you or your spouse to check with your HR or Accounting department to see if you can enroll for next year. (Most companies have their annual enrollment period right now so check immediately; if you don’t enroll now, you may not be able to take advantage of this tax break until 2011).

You may be wondering, “which one of these tax breaks should I use?” It is possible to use both tax breaks in the same tax year, but you cannot use both tax breaks on the same dependent care expenses so there are fairly complex tax strategies that come into play. Call us toll free at 1-888-273-3356 or visit us online at www.breedlove-online.com. As a client of GoNannies.com, we’re happy to provide a complimentary phone consultation to help you maximize your tax breaks this year and get you set up for 2010 and beyond.

If managed correctly, the tax breaks for employers can offset – sometimes even exceed – the employer tax costs. (Yes, those who pay legally can actually come out ahead. When the new legislation is enacted, this will become several thousand dollars per year for most families). Plus, your employee will get access to important benefits such as Social Security, Medicare, Unemployment Insurance, Earned Income Credit, and the ability to borrow money.

Founded in 1992 — by household employers for household employers — Breedlove & Associates has served more than 16,000 clients and processed more than $1.5 billion in household payroll. By focusing on the unique needs of household employers, Breedlove & Associates’ expertise and efficiency has been recognized in The Wall Street Journal, Kiplinger’s, Business Week and SmartMoney.com. For more information or a free phone consultation compliments of GoNannies.com, call 1-888-273-3356 or visit www.breedlove-online.com.