Should I pay taxes on my Nanny?
Should I pay taxes on my Nanny? YES! Avoid the IRS & Make More Money!
I remember finding out in college that my dad expected me to do my own taxes. Let’s just say I was not a happy camper. The word “taxes” brought a sense of dread and the thought of doing my own seemed daunting.
As I’ve gotten older, I’ve found that I’m not the only one with a general distaste for taxes. They are confusing and the jargon is anything but clear. This confusion also affects household staff as many are unsure whether they are supposed to receive a W-2 or 1099 from the families they work for. What many nannies may not realize is that receiving a 1099 from a family is a lose-lose situation for them. Not only are they losing hard-earned money, but they are also putting themselves at risk for back (nanny) taxes, penalties and interest from the IRS.
One Easy Step to Avoid the IRS!
Make More Money! (without working more!)
Why should you care about getting a W-2? Hypothetically let’s say two nannies earned $30,000. At the end of the year, one family gave their nanny a W-2 while the other family gave their nanny a 1099. The nanny who received a W2 pays about $2,295 in taxes while the nanny who received a 1099 pays about $4,590. That means the nanny who received a 1099 paid double in taxes. Not only did she lose $2,295, she could be later be penalized by the IRS!
The Bottom Line
C.S. Lewis wisely said “Integrity is doing the right thing, even when no one is watching.” When it comes to (nanny) taxes, it may often feel that no one is watching! This sometimes can make it easier to just accept the 1099 or take cash under the table, but there may be major consequences down the road. Regardless – in the case of a nanny receiving a 1099 or a W-2 -the answer is clear. Not only is filing with a W-2 the right choice, but it has a major pay off! Click here for more information about paying taxes on your household employee.