By Tom Breedlove
About the Writer:
Tom Breedlove is a partner at Breedlove & Associates, a full-service payroll and tax service specializing in household employment since 1992.
Failure to meet nanny tax obligations is considered felony tax evasion, which carries fines of up to $250,000 and up to 2 years of imprisonment. Usually, the IRS hits families with a less severe punishment – back taxes, penalties and interest – but it’s still a very expensive, time-consuming mess. Worse, the felony charge can mean loss of professional license – and, therefore, loss of livelihood.
The IRS and the state tax agencies – pressed for tax revenue due to growing deficits – have become very resourceful and aggressive about nanny tax enforcement. Information sharing from unemployment claims, disability claims, workers’ compensation claims, wage disputes, retirement benefits claims and general audits make the odds of getting caught higher than ever.
Additionally, failure to pay the nanny taxes means your employee loses all the benefits and protections other American workers enjoy – unemployment insurance, disability insurance, social security, medicare, and the ability to obtain credit/loans.
When you factor in the punishment, the increasing risk of getting caught, the employee’s benefits, and the cost to comply (which is much less than people think because of childcare tax breaks), it’s clear that paying the nanny taxes is the wise thing – and the right thing – to do for you and your nanny.
Breedlove & Associates is a household employment partner specializing in payroll, tax and compliance service. Call 1-888-273-3356 for a free phone consultation.