7 Reasons Nannies Should Be Paid on the Books

When it comes to having taxes withheld from their paycheck, many nannies are under the impression that doing so is only a benefit to their employers. Why wouldn’t a nanny want to maximize her paycheck and bring home as much cash each pay period as possible? But there are several important reasons nannies should only consider positions that pay on the books.

These include:

1. To comply with the law.

Being paid legally is not optional.The IRS classifies nannies as employees of the families for whom they work, thus subjecting them to the employment laws that govern household employees. While some parents and nannies try to skirt the issue and claim their nanny is an independent contractor, the IRS has definitively ruled that nannies are household employees.

2. To prove employment history.

Since there are no human resources departments in most households, nannies share the burden of offering proof of employment. In instances where a written contract is no in force or a letter of reference is unable to be secured, paystubs and tax returns can serve as proof of employment from a particular family.

3. To show verifiable income.

When applying for credit, a mortgage or a car loan, applicants must provide proof of verifiable income. Nannies who are paid legally have proof of gross and net wages that can be used to help determine credit worthiness and the ability to pay back debts.

4. To gain access to Social Security and Medicare benefits.

When nannies are paid legally contributions are made to Social Security and Medicare which can be accessed upon retirement. Since many nanny employers don’t fund formal retirement plans for their employees, nannies count on accessing these benefits to help with retirement income.

5. To qualify for unemployment benefits.

The ultimate promotion for a nanny is to work with a family until her services are no longer needed. When a nanny is terminated for no fault of her own, having short-term income to help her through the job search process can mean a significant difference in her finances and her ability to wait for the right job.

6. To be eligible for workers’ compensation coverage.

Many employers opt to obtain workers’ compensation insurance coverage for their nannies. This coverage can assist with medical bills and income when a nanny is hurt on the job. To be eligible for coverage, nannies must be paid on the books.

7. To take advantage of the earned income tax credit.

For lower income nannies with dependents, having access to earned income tax credits may offer a much needed tax break or refund at the end of the year.

Being compliant with tax laws isn’t optional, yet many parents and nannies believe that they can decide whether or not to pay their nanny on the books. Even if both parties agree to evade taxes, doing so is still a crime and punishable by fines and penalties under the law.

Morningside Nannies encourages all parents and nannies to comply with tax laws. If  you have questions about nanny taxes, call one of our placement specialists at (713) 526-3989 who can refer you to a nanny tax expert for a free consultation.

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