Household employment taxes are complicated! Learn more about what the risk factors are for ignoring nanny taxes below.
Risks When You Ignore the Nanny Taxes
We know that lots of families skip the the nanny tax. If you are thinking of going in that direction, please be sure you consider the following:
- Tax Fraud (a felony): Household employment taxes are part of your personal Federal Income Tax return. You sign this under penalties of perjury. If caught in an audit, this can be a felony offense.
- Workplace injury: When you pay off the books you are also skipping the protection of Workers’ Compensation Insurance. Workplace accidents do happen, and they are called accidents for a reason. The housekeeper didn’t intend to scald her arm, the senior caregiver didn’t intend to injure her back helping mom get out of the car, the nanny didn’t intend to trip over the toddler’s toy and break her wrist. All of these medical expenses are covered by Worker’s Compensation Insurance – and covered by YOU if you don’t have the insurance.
- Unemployment Benefits Claim: 75% of families who get “caught” come to the attention of the taxing authorities here. Mom passes away and her long term caregiver files for unemployment. Children grow up and go to school, families relocate, needs change. The IRS has formal information sharing agreements with more than 30 states. A claim made for an employer who did not report/pay unemployment taxes is routinely passed back to the IRS for scrutiny of the Federal employment taxes.
- Wage & Hour Claim: Advocacy groups such as The National Domestic Workers Alliance have well-financed and very successful educational outreach campaigns teaching domestic workers their rights. They have even established toll free numbers to help the domestic file formal complaints for not being paid either for all hours worked or at the overtime differential. The first inquiry to the employer being investigated is for payroll, tax, and time tracking records.
There is no statute of limitations on the failure to report and remit federal payroll taxes.
These are the risks factors of ignoring nanny taxes. Doing it right from the start is always easier. Let us help with nanny payroll services. Call for a free, no obligation consultation at 800.626.4829. HomeWork Solutions can also assist employers becoming current with back tax obligations.
HWS routinely works with clients with back tax obligations. Call today to learn how we can help you.
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