In the “nanny world”, the temptation to accept a job that pays CASH (off the books, no payroll or income tax reporting) is faced by every nanny. After all, who LIKES to pay taxes? Professional nannies know, however, that being paid legally is ultimately in their own best interest. Why?
Nanny jobs are, by their nature, not permanent positions. The children will grow and move on to school. The family’s child care needs change dramatically from full time, to part time, to after school or before school only. The full time nanny typically will have to move on every few years. The experienced, professional nanny knows that short term unemployment benefits are a life saver to bridge the time, planned or unplanned, between jobs.
While it is true that you can apply for and receive unemployment benefits even if you were paid cash only, your benefits will be delayed and you will eventually be faced with penalties for failure to file and pay your own income taxes.
Access to Medical Insurance under the Affordable Care Act
Employees (those with legal payroll) whose employers do not offer group plans – this is the majority of nanny employment – may obtain legally mandated individual health insurance through the online marketplaces. Low and middle-income employees qualify for ACA tax credits that will ensure that good coverage is also affordable coverage. Your employer may also offer to reimburse some or all of your individual insurance premium tax free using an Health Reimbursement Arrangement (HRA).
Whether you want to buy a home, rent an apartment, purchase a car, or just qualify for a cell phone plan, at some time or other, you will need to have verifiable income. Verifiable income means you can prove that you have a record of consistent income sufficient to meet your proposed financial obligations – either pay check stubs, direct deposit advices, bank statements witnessing the deposit of regular pay, and/or tax returns.
Workers’ Compensation Coverage
Any nanny can suffer an on the job injury that will require medical care (and cost), and that can keep her out of work either temporarily or permanently. Your employer may only obtain workers’ compensation insurance – insurance that would cover these medical bills and lost wages – if your income is on the books. If you are not being paid legally, your only option if you suffer an injury is to sue your employers – a costly and time consuming proposition.
Social Security & Medicare Benefits
Eventually you will retire and need retirement income. If you did not pay into the system you will not qualify for future benefits.