Not a goddamn thing compared to the cost of childcare.
But basically we can deduct a few grand from our taxable income out of the $40 grand we spend on childcare.
Which will be an insignificant amount. The most that can be claimed is $5k, so whatever your tax rate is, multiplied by $5k is what you lose out on by not being able to deduct care.
Theoretically, you or the nanny could run into some IRS/state income tax reporting issues since they may not declare the income. This gets doubly tricky if you pay via Venmo or Zelle, since technically you need to provide a 1099 if it’s over something like $600 for goods or services, iirc. This is also true if you try to claim payments to the nanny to try and apply for the childcare credit, or have a dependent care fsa that you intend to use to make the payments.
Even with a contract, most states are at-will which means the employer or employee can quit or get fired at any time.
I can't imagine anyone drafting a contract with a nanny stating that there's a mandatory 2-week period before they can quit or be fired. If you find something bad happening between the nanny and your kid, would you really want a contract stating they still are allowed to work for a period of time inside your own home with your child?
There's a difference between a standard employment document stating hours and expectations and wages and benefits, and something saying "you can't quit without notice".
we did a contract just to make sure we're all on the same page, but afaict it's not legally enforceable (if you are paying under the table). I imagine any judge would ask to see some kind of proof of employment and then everyone is screwed
Yes, if you're a nanny and your family refuses to pay you, you get to choose. Do I sue them for this 1-2 week period? If so, I'll get that money but I'm going to be expected to pay taxes on the full amount since I was hired.
If you're the family and you fire your nanny, and they sue, you'll need to file the proper tax docs and you're not really out any money. Since the person getting the money pays taxes, not you.
Could get in some small trouble with the IRS for not filing a 1099-misc but you could plead ignorance on the first offense and probably not face any serious repurcussions.
It does cut both ways. Unless you have a really weird situation, your nanny is legally a W-2 employee, not a 1099 contractor. So from the nanny's perspective, it's "if I bring this up, I have to pay back taxes and penalties on the earnings." From the parents' perspective, it's "if this gets brought up, I have to pay back taxes as an employer, have the IRS sniffing around, and have the department of labor potentially yell at me for employee miscategorization."
The nanny will be on the hook for more money on a percentage basis (income taxes + FICA vs just FICA), but usually the employer is in a position where they have more to lose from that kind of government scrutiny. And a lower-wage employee usually has more luck pleading ignorance than a higher-income employer.
Edit: typo
Yep, someone else pointed that out too.
Depends whether they work directly for you (under the table or above board) or through a service, in which case the service will handle all the tax stuff. But it will be more expensive, for obvious reasons (it's all legal, hopefully)
Yes, if you pay them under the table, the contract is not only unenforceable but evidence of tax evasion. Nannies want to be paid under the table so that they don’t have to pay taxes. So, bringing an employment contract to a judge without reporting the payments on your taxes would be really not smart.
I think that 2 week notice thing is not for the nanny to keep working with you and kid for 2 more weeks but more like if you fire a nanny you *should* pay for 2 weeks before sending them off. Kinda like severance pay.
It's a nice thing to do if it's on good terms. Like you just don't need their services, but want to make sure they have enough time to get their next gig.
If they're a screw-up, then nah, they don't deserve anything for the sake of your kids and household.
It's kind of nuts, our nanny was making $60k per year untaxed. We met so many ex-daycare workers/teachers that were just looking to make more money (and have a bit more freedom). You will most likely be OK but it could really come back and kick you in the ass, like if the nanny gets pissed off for some reason. They will have all the leverage since you are the employer. The biggest hurdle for our nanny was health insurance, but she was able to get it thru her partner. And like others said, there's now a grey area as to whether or not Zelle or Venmo will be sending you 1099's at the end of the year. So you'd wanna prepare for the worst case scenario even if you aren't paying it throughout the year.
I recently did a lot of internet research on this topic recently, ultimately we decided against going for a nanny specifically because any long term situation would definitely require legal payment which in the end it was easier for us to go to daycare. IIRC the max yearly is $2700 (in USA) anything over & you open yourself up to liability. As others have said the nanny could always come back and say you didnt provide health ins, over time etc. Seemed like a headache. There are nanny payroll companies that will help you like through care.com or poppins payroll. Any way you go i would advise do research and know your liability & local legal/tax laws & compare with trust factor of nanny. Also nanny vs baby sitter is different, someone coming in 15-25 hours a week vs once a month or Saturdays only. Im in HCOL so we would hit 2700USD pretty quick even on part time nanny
They can claim you didn't pay them or improperly paid them, such as no overtime, or underpaid, and seek more money, and the government can come against you for unpaid taxes.
Apparently we’re the only people that have paid Nannies under the table. We’ve also had a nanny that preferred the 1099 setup and a formal contract and did that for her. There are some downsides (like they can walk away whenever with no notice) and we’ve had some misunderstandings about holidays and PTO but our Nannie’s have been reasonable and haven’t had many problems going the informal route.
We have had three nannies all cash. No problems with them at all. Still see them regularly even though our kids are older.
We have friends that have also done cash, and others did payroll. It's just a judgement call based on how risk averse you want to be (and frankly, how well you know the nanny).
Taxes. You’re obligated to withhold and issue a W2. If you don’t you’ll get in trouble along with the nanny.
The IRS *does* enforce this - aggressively. And if you fill out your tax refund wrong (claiming child care expenses) they’ll catch you.
They're double dipping. They don't want a record of employment bc it would mess with their illegitimate benefits.
In the US, nannys are classified as household employees and should receive a W-2. Paying under the table, or even 1099, puts you at risk for back taxes and interest, plus whatever fines are associated. All it takes is a tax audit, a workman's comp claim, or a report from a disgruntled former nanny.
You have to do your own risk assessment. There are thousands of families that do it both ways successfully.
What if it is not a nanny that works daily, but a babysitter that comes by once a week every week for a year. Where is the line between when cash is okay and when I need to fill out a 1099 or W-2?
Does the babysitter have other customers? If so they likely considered self employed and you are their customer and not an employer.
If you are their employer (a murky distinction) you need to file a W2 if you pay them more than 2600.
No I mean do nanny’s from nanny companies carry some sort of liability insurance or something?
I’d be worried my under the table nanny would like break my kids leg on accident and then never come back, like how my neighbor hired a shady handyman to dig out side of his house and they nicked a gas line
Lol that was my reaction too. Every family we know that's used a nanny has gone cash. The nannies have all been lovely people.
Obviously others might choose to do payroll, no big deal. But like, the holier-than-thou stick up your butt attitude is pretty ridiculous.
Yeah for sure. But again, judgement call based on risk. Kinda like how smoking weed was illegal for a long long time.
Don't get me wrong, I am not advocating for it necessarily either. We actually wanted to do payroll, but had a harder time finding a nanny that wanted to do payroll so we adapted.
I was just reacting to the first commenter's wording that made it seem like a nanny looking for a cash arrangement was indicative of a poor caretaker or shady character.
Among other things that have or may be listed, if they make an unemployment claim (even after a separation with another job/family) it will almost certainly result in an audit of your employer/employee relationship. Results will vary from paying back taxes to more severe outcomes.
If they are undocumented you can prob sleep easier but then you’re also arguably exploiting them.
You could go to jail if you get caught. That's the main reason we played it straight and said no the all of the nannies asking for cash.
You can reduce the tax burden on both you and your nanny by providing a per diem though. Keep it under the annual gift limit.
Most people pay babysitters cash. (Like since the beginning of time) Only the squarest of squares will insist on paying them like an actual employee, then I doubt you want to pay for all the benefits & insurance that goes with it.
A private nanny doesn't require benefits or insurance. It does require filing a 1099 form as an independent contractor so the necessary taxes are handled properly. There are a lot of nanny apps that will handle all of that for you for a modest fee, in addition to conducting things like background checks.
And yes, if you pay a babysitter close to or more than $600 in a year you should be filing a 1099-MISC. Doesn't matter if "that's the way squares do it", it's the law, and it doesn't cost the person making the payments anything. Just means the person GETTING the money needs to claim it as taxable income.
It looks like you're correct. Nannys, housekeepers maids and gardeners are considered household employees, unless they're contracted through another business.
So if they go through a service, that service will handle all the details. If you're paying them directly then that's a different situation.
Anyone is an employee if they work in or around your private residence. Repair men and other temporary contractors aren't your employees because they work either for themselves or for someone else.
The nanny works directly for you because they're your employee and you control the work that they do and how they do their work.
So yes it looks like a W-2 would be the proper situation versus a 1099. Shame on me, I used to work in tax preparation so I should know better.
For one, you won't be able to claim child care costs on your taxes.
Financial illiterate here, what does that do?
Not a specialist, but broadly in the US, You can set aside up to something like 5k per year to pay for childcare that doesn't get taxed
Reduces your overall tax liability so could result in you owing more because you can’t claim the expense.
Not a goddamn thing compared to the cost of childcare. But basically we can deduct a few grand from our taxable income out of the $40 grand we spend on childcare.
And you will have other costs like day camps in the summer (depending on the kid’s age).
Which will be an insignificant amount. The most that can be claimed is $5k, so whatever your tax rate is, multiplied by $5k is what you lose out on by not being able to deduct care.
Or participate in a dependent care fsa
I believe this is if both parents work fulltime as well
It isn't.
Both parents need to have income, but there's no rules about full time or part time.
Is this DCFSA or something else?
Both parents need to have income to qualify for the Child and Dependent Care Tax Credit in a given year.
Taxes and not being able to use and FSA benefits you might be lucky enough to have.
Theoretically, you or the nanny could run into some IRS/state income tax reporting issues since they may not declare the income. This gets doubly tricky if you pay via Venmo or Zelle, since technically you need to provide a 1099 if it’s over something like $600 for goods or services, iirc. This is also true if you try to claim payments to the nanny to try and apply for the childcare credit, or have a dependent care fsa that you intend to use to make the payments.
Not Zelle, Venmo/Paypal only. Unless that changed.
I wasn’t sure about Zelle, but I figured if they’re attached to your bank, they’d want to do the same
No contract means they can walk away anytime. If they plan to drive your kid the insurance may have issues.
Even with a contract, most states are at-will which means the employer or employee can quit or get fired at any time. I can't imagine anyone drafting a contract with a nanny stating that there's a mandatory 2-week period before they can quit or be fired. If you find something bad happening between the nanny and your kid, would you really want a contract stating they still are allowed to work for a period of time inside your own home with your child? There's a difference between a standard employment document stating hours and expectations and wages and benefits, and something saying "you can't quit without notice".
Contract also would have the rate, pto, sick days, payouts, if insurance is provided etc. who covers gas if the nanny drives the kids.
we did a contract just to make sure we're all on the same page, but afaict it's not legally enforceable (if you are paying under the table). I imagine any judge would ask to see some kind of proof of employment and then everyone is screwed
It's legally enforceable but you'd both have to admit to tax fraud at the same time, so both parties have a pretty strong incentive to not litigate
Yes, if you're a nanny and your family refuses to pay you, you get to choose. Do I sue them for this 1-2 week period? If so, I'll get that money but I'm going to be expected to pay taxes on the full amount since I was hired. If you're the family and you fire your nanny, and they sue, you'll need to file the proper tax docs and you're not really out any money. Since the person getting the money pays taxes, not you. Could get in some small trouble with the IRS for not filing a 1099-misc but you could plead ignorance on the first offense and probably not face any serious repurcussions.
It does cut both ways. Unless you have a really weird situation, your nanny is legally a W-2 employee, not a 1099 contractor. So from the nanny's perspective, it's "if I bring this up, I have to pay back taxes and penalties on the earnings." From the parents' perspective, it's "if this gets brought up, I have to pay back taxes as an employer, have the IRS sniffing around, and have the department of labor potentially yell at me for employee miscategorization." The nanny will be on the hook for more money on a percentage basis (income taxes + FICA vs just FICA), but usually the employer is in a position where they have more to lose from that kind of government scrutiny. And a lower-wage employee usually has more luck pleading ignorance than a higher-income employer. Edit: typo
Yep, someone else pointed that out too. Depends whether they work directly for you (under the table or above board) or through a service, in which case the service will handle all the tax stuff. But it will be more expensive, for obvious reasons (it's all legal, hopefully)
Yes, if you pay them under the table, the contract is not only unenforceable but evidence of tax evasion. Nannies want to be paid under the table so that they don’t have to pay taxes. So, bringing an employment contract to a judge without reporting the payments on your taxes would be really not smart.
I think that 2 week notice thing is not for the nanny to keep working with you and kid for 2 more weeks but more like if you fire a nanny you *should* pay for 2 weeks before sending them off. Kinda like severance pay.
It's a nice thing to do if it's on good terms. Like you just don't need their services, but want to make sure they have enough time to get their next gig. If they're a screw-up, then nah, they don't deserve anything for the sake of your kids and household.
Yup totally, we had both situations and in one case we just fired and in one case we more nicely let go and paid for two extra weeks.
Yup totally, we had both situations and in one case we just fired and in one case we more nicely let go and paid for two extra weeks.
With a contract they can walk anytime.
Are you planning to run for office?
Or seeking an appointed position. So many have been tripped up by this. It was not worth the risk for us.
It's kind of nuts, our nanny was making $60k per year untaxed. We met so many ex-daycare workers/teachers that were just looking to make more money (and have a bit more freedom). You will most likely be OK but it could really come back and kick you in the ass, like if the nanny gets pissed off for some reason. They will have all the leverage since you are the employer. The biggest hurdle for our nanny was health insurance, but she was able to get it thru her partner. And like others said, there's now a grey area as to whether or not Zelle or Venmo will be sending you 1099's at the end of the year. So you'd wanna prepare for the worst case scenario even if you aren't paying it throughout the year.
I wouldn't. But I have a bad back.
I recently did a lot of internet research on this topic recently, ultimately we decided against going for a nanny specifically because any long term situation would definitely require legal payment which in the end it was easier for us to go to daycare. IIRC the max yearly is $2700 (in USA) anything over & you open yourself up to liability. As others have said the nanny could always come back and say you didnt provide health ins, over time etc. Seemed like a headache. There are nanny payroll companies that will help you like through care.com or poppins payroll. Any way you go i would advise do research and know your liability & local legal/tax laws & compare with trust factor of nanny. Also nanny vs baby sitter is different, someone coming in 15-25 hours a week vs once a month or Saturdays only. Im in HCOL so we would hit 2700USD pretty quick even on part time nanny
They can claim you didn't pay them or improperly paid them, such as no overtime, or underpaid, and seek more money, and the government can come against you for unpaid taxes.
Apparently we’re the only people that have paid Nannies under the table. We’ve also had a nanny that preferred the 1099 setup and a formal contract and did that for her. There are some downsides (like they can walk away whenever with no notice) and we’ve had some misunderstandings about holidays and PTO but our Nannie’s have been reasonable and haven’t had many problems going the informal route.
We have had three nannies all cash. No problems with them at all. Still see them regularly even though our kids are older. We have friends that have also done cash, and others did payroll. It's just a judgement call based on how risk averse you want to be (and frankly, how well you know the nanny).
Taxes. You’re obligated to withhold and issue a W2. If you don’t you’ll get in trouble along with the nanny. The IRS *does* enforce this - aggressively. And if you fill out your tax refund wrong (claiming child care expenses) they’ll catch you.
My guess is that the nannies he’s interviewing can’t legally work in the country. So, the IRS is less of a concern than ICE.
They're double dipping. They don't want a record of employment bc it would mess with their illegitimate benefits. In the US, nannys are classified as household employees and should receive a W-2. Paying under the table, or even 1099, puts you at risk for back taxes and interest, plus whatever fines are associated. All it takes is a tax audit, a workman's comp claim, or a report from a disgruntled former nanny. You have to do your own risk assessment. There are thousands of families that do it both ways successfully.
And to add on, if they file for unemployment, you get double whacked by unemployment insurance penalties and business/employer missing tax penalties.
What if it is not a nanny that works daily, but a babysitter that comes by once a week every week for a year. Where is the line between when cash is okay and when I need to fill out a 1099 or W-2?
Pretty sure it's based on how much you pay them, but I'm not a tax professional.
Does the babysitter have other customers? If so they likely considered self employed and you are their customer and not an employer. If you are their employer (a murky distinction) you need to file a W2 if you pay them more than 2600.
It looks like $2700/year or $1000/quarter is the line in 2024
If you drop any coins it's a bigger pain to pick it up.
For me it would be important that the person caring for my child doesn’t start off by asking me to break the law.
Yea also like what if she or he kills your kid
It's still illegal, even if nanny is paid under the table
No I mean do nanny’s from nanny companies carry some sort of liability insurance or something? I’d be worried my under the table nanny would like break my kids leg on accident and then never come back, like how my neighbor hired a shady handyman to dig out side of his house and they nicked a gas line
Oh FFS
Lol that was my reaction too. Every family we know that's used a nanny has gone cash. The nannies have all been lovely people. Obviously others might choose to do payroll, no big deal. But like, the holier-than-thou stick up your butt attitude is pretty ridiculous.
Well, there’s the whole “it’s illegal” part that sort of makes it a big deal.
Yeah for sure. But again, judgement call based on risk. Kinda like how smoking weed was illegal for a long long time. Don't get me wrong, I am not advocating for it necessarily either. We actually wanted to do payroll, but had a harder time finding a nanny that wanted to do payroll so we adapted. I was just reacting to the first commenter's wording that made it seem like a nanny looking for a cash arrangement was indicative of a poor caretaker or shady character.
Among other things that have or may be listed, if they make an unemployment claim (even after a separation with another job/family) it will almost certainly result in an audit of your employer/employee relationship. Results will vary from paying back taxes to more severe outcomes. If they are undocumented you can prob sleep easier but then you’re also arguably exploiting them.
I’m scared of the government. I’d rather pay more and never have to worry about getting nasty letter from the government.
You could go to jail if you get caught. That's the main reason we played it straight and said no the all of the nannies asking for cash. You can reduce the tax burden on both you and your nanny by providing a per diem though. Keep it under the annual gift limit.
Since they don’t want to pay taxes on their income you should pay them less than the going rate.
Who wants to pay taxes?
No one. But if they are gonna steal using me I want a cut.
Most people pay babysitters cash. (Like since the beginning of time) Only the squarest of squares will insist on paying them like an actual employee, then I doubt you want to pay for all the benefits & insurance that goes with it.
Nannies aren’t babysitters
Could have swore that was their entire purpose..
Google is free, little buddy
No thanks-I'm good 🐑🐑🐑🐑🐑
Are the emojis indicating that you willfully stay baaaaaaaaaadly misinformed?
Nope. Didn't expect you to get it r/whooosh
OP is asking about a nanny, not babysitters. Babysitters only work on occasion, and are not working on a part time nor full time basis.
I see
A private nanny doesn't require benefits or insurance. It does require filing a 1099 form as an independent contractor so the necessary taxes are handled properly. There are a lot of nanny apps that will handle all of that for you for a modest fee, in addition to conducting things like background checks. And yes, if you pay a babysitter close to or more than $600 in a year you should be filing a 1099-MISC. Doesn't matter if "that's the way squares do it", it's the law, and it doesn't cost the person making the payments anything. Just means the person GETTING the money needs to claim it as taxable income.
Doesn’t the IRS classify nannies as employees vs contractors, and require W-2s?
It looks like you're correct. Nannys, housekeepers maids and gardeners are considered household employees, unless they're contracted through another business. So if they go through a service, that service will handle all the details. If you're paying them directly then that's a different situation. Anyone is an employee if they work in or around your private residence. Repair men and other temporary contractors aren't your employees because they work either for themselves or for someone else. The nanny works directly for you because they're your employee and you control the work that they do and how they do their work. So yes it looks like a W-2 would be the proper situation versus a 1099. Shame on me, I used to work in tax preparation so I should know better.
Yeah, that SUCKS for independent contractors.
I would tell them no I won’t pay them under the table but I will pay them cash. What they do then is on them
No
[удалено]
Legally in the US it is not. Legally they’re household employees (not contractors) and you have tax obligations as her employer.
Well shit, ok then