When you hire a nanny,
housekeeper or other domestic worker, pay close attention to
the tax rules even if you don't expect to land a big-shot job
in Washington, D.C.
Over the years, there are been news
stories about political appointees who lost their jobs and got
into trouble because they didn't pay nanny taxes. The same
could happen to you.
You must generally pay Social
Security, Medicare and federal unemployment taxes on wages
paid to domestic workers who are considered "employees" under
However, you don't have to bother with
You pay someone less than $1,500
in 2006 (up from $1,400 in 2005).
You hire students age 18 or
You hire occasional workers like painters or
The laws related
to domestic workers are confusing and poorly understood,
but ignoring them can land you in hot water — even
decades from now.
Beyond that, you have to determine if domestic helpers
are employees under your control or independent
contractors in business for themselves.
It's not a
simple question, but if the workers come part-time and
advertise or hand out business cards, they're probably
self-employed and responsible for their own taxes. On the
other hand, a live-in housekeeper or full-time nanny who works
in your home is an employee.
believe a worker is an independent contractor:
Put the arrangement in
writing and keep a copy of the person's business card,
brochure or advertisement. Why do you need this protection?
Sometimes, domestic helpers reveal the names of people they
worked for when they apply for Social Security. The
IRS then sends out assessments for back taxes, penalties
and interest — even many years later.
Because this is a confusing issue, call
Ronald J. Cappuccio, J.D.,
LL.M.(Tax) at (856) 665-2121 to ensure
you're on the right track.