Felony tax evasion – something few envision when they consider paying summer help under the table.
The kids are out of school; your life is even crazier than usual. And, there’s no room for additional bookkeeping on your to-dos.
But, according to Stephanie Breedlove, owner of Breedlove and Associates and creator of Care.com Home Pay, neglecting nanny taxes could land you in court.
She offers these tips for properly accounting for the cost of summer help:
Know your status.
“If you pay your summer nanny $1,800 or more during the calendar year, you have some employer obligations (a.k.a. the “nanny taxes”),” Breedlove tells PINK.
By ignoring those obligations and paying “under the table,” you expose yourself to expensive penalties as well as back taxes, interest and possible evasion charges.
Understand labor laws in your area.
Federal wage and hour law provides protection to all workers, including seasonal employees like summer nannies.
“Families need to make sure they pay at or above minimum wage as well as time-and-a-half for any hours over 40 in a seven day work week,” she says.
Benefit from Flexible Spending Account perks.
As long as both spouses are either employed or one is a full-time student, a family can set aside up to $5,000 in pre-tax dollars to pay for the nanny’s wages and the employer taxes.
“Depending on the family’s marginal tax rate, this can save up to $2,300 per family per year,” says Breedlove.
Bonus PINK Link: Did you have to rush back after maternity leave?
How has paying your nanny on the books helped save money?
By Sonya Washington
“Death, taxes and childbirth! There’s never any convenient time for any of them.” Margaret Mitchell
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