One of the best in the business when it comes to Household Payroll, GTM's owner offers some great tips here:
When it comes to tax responsibilities for nannies and employers, separating fact from fiction can be hard. Enter Guy Maddalone of GTM Payroll Services, who is here to set the record straight and answer some of the most common questions nannies and parents face.
eNannySource: What are a nanny employer’s legal tax responsibilities?
Guy: If an employer pays cash wages of $1,800 2013 or more to their household employee, they must withhold Social Security and Medicare taxes. Employers are not required to withhold Federal and State income taxes unless it is agreed upon by both parties. If income taxes are not withheld throughout the year, your nanny will be responsible for paying them at the end of the year. If an employer pays a total of $1,000 2013 or more per quarter to a household employee, then they must pay federal unemployment tax.
eNannySource: What are the risks of non-compliance?
Guy: By not paying payroll taxes, the employer risks being investigated by the IRS, which could result in hefty fines of $25,000-$100,000, penalties and potential jail time. They will also be responsible for the payment of all back employment taxes, interest and penalties and will not be eligible for tax breaks like the Dependent Care Assistance Program or the Child Tax Credit. Additionally, if you are in a state that requires workers compensation insurance and you do not pay taxes, you cannot obtain the insurance, and as a result if your nanny becomes injured on the job you could be responsible for her lost wages and medical expenses. Paying taxes for your household employee allows you to take advantage of a flexible-spending plan by using their salary as a qualifying expense. Click through to learn more:
via Expert Insights: Nanny Employer Tax Facts with Guy Maddalone of GTM Payroll Services | eNannySource.