Avoiding Penalities By Filing Nanny Tax Returns
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Avoiding Penalities By Filing Nanny Tax Returns
People are often tempted to pay a nanny salary “under the table,” especially for short-term employment stints. After all, you're paying a nanny salary of less than a couple thousand dollars and it really isn't worth all of the time and paperwork involved, right? Not exactly. What happens when your nanny, who suddenly realizes that as a lower wage earner is eligible to apply for Earned Credit Revenue (EIC), asks you for a W-2 form? Your nanny has every right to apply for that credit but when she does, there's suddenly a nice man in an expensive suit banging on your door, demanding to know why you haven't paid your share of the nanny taxes. Uh oh! You've got some ‘splainin' to do.
By diligently filing all of the necessary nanny tax forms, you avoid putting yourself (and your nanny) in the uncomfortable position of having to defend yourself to the IRS. Good luck with that! Get in touch with someone who knows what they're doing. You might know another employer who's had lots of experience with it, or you might want to consider getting the help of a specialized nanny tax accountant to get you started. The important thing is to just get started. Period. By being on the up-and-up with your nanny tax deductions, you can legitimately begin to claim expenses directly related to live-in nanny pay (if that's your particular situation), or other expenses that may be reasonable and acceptable.
