The Importance of Paying Household Taxes

One of the questions that I am frequently asked is how to handle taxes with household employees. Like any profession, it is crucial that you comply with the IRS and file taxes for any and all household employees you employ, including nannies, chefs, housekeepers, estate managers, and sitters just to name a few.

Unfortunately, it’s estimated that up to 80% of all household taxes are not paid. Opting to not pay taxes has multiple drawbacks. Should you decide to not pay taxes and are ultimately caught you will not only pay back taxes, but potentially fines and interest. This burden to comply legally does not fall on the nanny, but instead is the solely the responsibility of the family as the employer.

The economic downturn has also brought a new issue to light when it comes to taxes. With many nannies being laid off across the country, unemployment offices ask nannies to fill out an application for assistance including the names and addresses of her past employers. This sets in motion an investigation of why those employers have not been paying into unemployment during those years. Families across the U.S. are having to “catch up” with all of their tax obligations at once.

Like many premier agencies in the United States, we at Mom’s Best Friend walk our clients through the entire hiring process. One of the critical steps in this process is setting clients up with a household tax and payroll company that can assist those who have not previously employed someone in their home with all the right steps to ensure appropriate legal compliance from A to Z, as well as to help advise on how to best take advantage of any applicable tax breaks.

Breedlove & Associates specializes in household employee taxes and payroll, are experts in this niche field, and have been helping Mom’s Best Friend client families for more than 15 years. They charge families a nominal fee of between $150-200/quarter to handle everything from payroll, to direct deposit, to end-of-year tax forms. This is such a small price to pay to sleep better at night knowing you are doing everything legally. Further, most accountants recommend you use this type of service because they are typically not well versed in accounting or legal issues associated with employing household staff. Breedlove and Associates, on the other hand, may even save you money by educating you on the tax advantages associated with paying your nanny legally.

As an employer of household staff, I know firsthand the importance of following the IRS guidelines and utilize Breedlove to help make sure I am complying with all applicable laws and procedures. We want to be a resource for you, so please let us know if we can help you obtain answers to any questions you might have in this area.

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