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Old Jan 20, 12, 4:50 pm   #1
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Nanny taxes standards?

We've been interviewing some nannies and it seems like the presumption is that we, the employer, will pay all of the taxes (i.e. social security, medicare, fed income, and state). I'm just wondering if this is "standard" in NYC or if we've come across rather demanding candidates. Basically the presumption is that if we want to do this above board (which we certainly do) we need to make the take-home pay congruent with what they would get below board (i.e. we "gross up" to include the taxes).

Are we being taken for a ride or is this basically how it works? Thanks!
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Old Jan 20, 12, 5:56 pm   #2
 
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I think it's pretty standard to have at least a partial gross-up if you're paying on the books. Think of it like sales tax when shopping online. Do you buy that new computer from Amazon who add on NY sales tax or Newegg who charge the same price but don't collect the tax? For a nanny, it's tough to justify taking an on-the-books job with lower take home pay.

You can argue that a full gross-up isn't necessary since there are ancillary benefits to being on-the-books (Social Security, Medicare, unemployment, etc.). But there are also some hidden pitfalls. I heard about a family recently who wanted to move their nanny on the books and were willing to gross-up to accomplish it, but the nanny would have lost her low-cost health insurance (not sure if it was Medicaid or what) because she would be making too much money to qualify, and they couldn't afford to pay for private health insurance. So off-the-books they remained.
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Old Jan 20, 12, 9:20 pm   #3
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Originally Posted by magiciansampras View Post
We've been interviewing some nannies and it seems like the presumption is that we, the employer, will pay all of the taxes (i.e. social security, medicare, fed income, and state). I'm just wondering if this is "standard" in NYC or if we've come across rather demanding candidates. Basically the presumption is that if we want to do this above board (which we certainly do) we need to make the take-home pay congruent with what they would get below board (i.e. we "gross up" to include the taxes).
One question...

Are you running for office? If so, go legit. Otherwise, tell your Nanny that she just became an independent contractor.

dh
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Old Jan 20, 12, 10:23 pm   #4
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Frankly, I am stunned that an attorney would even hint that you should pay an employee off the books.

Also, how in the world could anyone think for a moment to even suggest aiding in the commission of fraud on an insurance or "entitlement" program is somehow okay?

OP, what do you think will happen if your nanny is injured on the job and it is discovered that you have no Workers Comp. insurance? Anyone here know what the minimum penalty demanded last year by the State of New York was for failure to carry Workers Compensation insurance? It was more than $50,000 even for one employee! (I'm not saying they collected it in every case, but they did demand it.)

Then there's state-mandated disability insurance. Think you can go without that as well?

Think off the books nannies don't get injured and then threaten to blow the whistle on the families who hire them? Think again! Do you want to take this risk?

Let's start with you reading this publication: Paying Social Security tax on a household employee which is really basic.

Then, consider that you need to obtain an I-9 and if the candidate is eligible to work and assuming you conducted a background check, you'll then need a W4.

Of course, at this point you haven't even made out a single payroll check. While there are people who say they can do all this themselves, I recommend a payroll service like Paychex who will calculate all the deductions properly, pay all of them, and most importantly, file every form that needs to be filed, e.g. the NYS-45.

Personally, I would not take the risks in hiring off the books household help. Apart from it being unquestionably illegal, I think doing so is one of the dumbest ideas around. If you have any doubts about this, please consult an attorney.
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Old Jan 21, 12, 7:26 am   #5
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Originally Posted by dhammer53
Otherwise, tell your Nanny that she just became an independent contractor.
Isn't this "legit"?
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Last edited by dstan; Jan 21, 12 at 11:49 am. Reason: getting a bit too personal, even without naming names
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Old Jan 21, 12, 12:26 pm   #6
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Originally Posted by Landing Gear View Post
Frankly, I am stunned that an attorney would even hint that you should pay an employee off the books.

Also, how in the world could anyone think for a moment to even suggest aiding in the commission of fraud on an insurance or "entitlement" program is somehow okay?

OP, what do you think will happen if your nanny is injured on the job and it is discovered that you have no Workers Comp. insurance? Anyone here know what the minimum penalty demanded last year by the State of New York was for failure to carry Workers Compensation insurance? It was more than $50,000 even for one employee! (I'm not saying they collected it in every case, but they did demand it.)

Then there's state-mandated disability insurance. Think you can go without that as well?

Think off the books nannies don't get injured and then threaten to blow the whistle on the families who hire them? Think again! Do you want to take this risk?

Let's start with you reading this publication: Paying Social Security tax on a household employee which is really basic.

Then, consider that you need to obtain an I-9 and if the candidate is eligible to work and assuming you conducted a background check, you'll then need a W4.

Of course, at this point you haven't even made out a single payroll check. While there are people who say they can do all this themselves, I recommend a payroll service like Paychex who will calculate all the deductions properly, pay all of them, and most importantly, file every form that needs to be filed, e.g. the NYS-45.

Personally, I would not take the risks in hiring off the books household help. Apart from it being unquestionably illegal, I think doing so is one of the dumbest ideas around. If you have any doubts about this, please consult an attorney.
Um, I'll well aware of the law. Please read my OP. We will be doing this above board. The question relates to whether it is standard to gross up in order to pay all taxes for the employee, not whether it is advisable to not report the nanny and her income.
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Old Jan 23, 12, 9:14 am   #7
 
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Isn't this "legit"?
By your wink I assume you're kidding, but just in case... no, it's not. Employers of household employees like nannies are subject to special tax and insurance rules and regulations that you can't skirt by just calling them an independent contractor.

And Landing Gear, I'm not saying (or hinting) that it's okay to skirt the legal requirements. I'm saying that for many families and nannies, the reality is that compliance would make it extremely difficult for the families to pay a wage that was acceptable to the workers. In some of those cases, both parties decide they'd rather assume the legal and financial risks of noncompliance.

The fact that so many people pay their domestic help off the books (and the numbers I've seen are quite staggering) suggests to me that there is a fundamental problem with how some of these rules are set up. It needs to be easier to comply in the first place and easier to get into compliance for those who didn't start out that way.
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Old Jan 23, 12, 10:26 am   #8
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By your wink I assume you're kidding, but just in case... no, it's not. Employers of household employees like nannies are subject to special tax and insurance rules and regulations that you can't skirt by just calling them an independent contractor.
I was kidding. Nannies get so exploited especially here in NYC by wealthy parents who would just as soon NOT spend time raising their kids while having the nannies act as their personal maids too.
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Old Jan 23, 12, 9:38 pm   #9
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Nannies get so exploited especially here in NYC by wealthy parents who would just as soon NOT spend time raising their kids while having the nannies act as their personal maids too.
Certainly a topic for Omni.

How can you say something that awful? Your statement is a broad generalization.
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Old Jan 23, 12, 9:56 pm   #10
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Isn't this "legit"?
There can be severe penalties for wrongly classifying someone as an independent contractor when the government believes he or she is an employee.

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Originally Posted by magiciansampras View Post
Um, I'll well aware of the law. Please read my OP. We will be doing this above board. The question relates to whether it is standard to gross up in order to pay all taxes for the employee, not whether it is advisable to not report the nanny and her income.
Uh, you're welcome. But since you know the law, here's a question for you. Prospective nanny says to you, e.g., I want $400 a week. You say you're willing to pay $400 a week but the nanny then specifies, "I want it in cash." You then suggest you will, as you put it, "gross up" her wages so that after taxes it comes to $400 a week. Question: Are you, in reality, paying her taxes? If so, is the money you are paying above the original $400 taxable income to her?




Quote:
Originally Posted by themicah View Post
By your wink I assume you're kidding, but just in case... no, it's not. Employers of household employees like nannies are subject to special tax and insurance rules and regulations that you can't skirt by just calling them an independent contractor.
Absolutely correct!

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Originally Posted by themicah View Post
And Landing Gear, I'm not saying (or hinting) that it's okay to skirt the legal requirements. I'm saying that for many families and nannies, the reality is that compliance would make it extremely difficult for the families to pay a wage that was acceptable to the workers. In some of those cases, both parties decide they'd rather assume the legal and financial risks of noncompliance.
Boo hoo! Charge all of them and throw in an extra one for Conspiracy.

Quote:
Originally Posted by themicah View Post
The fact that so many people pay their domestic help off the books (and the numbers I've seen are quite staggering) suggests to me that there is a fundamental problem with how some of these rules are set up. It needs to be easier to comply in the first place and easier to get into compliance for those who didn't start out that way.
Law school is over, amigo. You are arguing "policy" which will get you nowhere and these people, hopefully in jail. The same bogus "arguments" are made to justify noncompliance with immigration laws.



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I was kidding. Nannies get so exploited especially here in NYC by wealthy parents who would just as soon NOT spend time raising their kids while having the nannies act as their personal maids too.
That's true in many cases, I am sure. But what can be done? I do know that the federal government did tighten a lot of the requirements for au pairs who really were getting exploited.
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Old Jan 24, 12, 7:12 am   #11
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How can you say something that awful? Your statement is a broad generalization.
Are you kidding?

http://nymag.com/news/features/66471/

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Originally Posted by Landing Gear
That's true in many cases, I am sure. But what can be done? I do know that the federal government did tighten a lot of the requirements for au pairs who really were getting exploited.
At least there is this: http://www.labor.ny.gov/legal/domest...of-rights.shtm
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Last edited by Analise; Jan 24, 12 at 7:18 am.
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Old Jan 24, 12, 7:28 am   #12
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Originally Posted by Landing Gear View Post
Uh, you're welcome. But since you know the law, here's a question for you. Prospective nanny says to you, e.g., I want $400 a week. You say you're willing to pay $400 a week but the nanny then specifies, "I want it in cash." You then suggest you will, as you put it, "gross up" her wages so that after taxes it comes to $400 a week. Question: Are you, in reality, paying her taxes? If so, is the money you are paying above the original $400 taxable income to her?
What is this a test? This is why we hire a CPA. My question relates only to norms. If you are unwilling or unable to answer that question, then just say so.
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Old Jan 24, 12, 11:16 am   #13
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Question: Are you, in reality, paying her taxes? If so, is the money you are paying above the original $400 taxable income to her?
Yes, you are, and tax return forms will ask you this, though it's impossible to verify if you're paying in cash.
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Old Jan 24, 12, 2:20 pm   #14
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What is this a test? This is why we hire a CPA. My question relates only to norms. If you are unwilling or unable to answer that question, then just say so.
I'm pointing out that you need an opinion letter and you would do well to hire a licensed professional to give you one.
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Old Jan 24, 12, 7:43 pm   #15
 
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It seems to me there's close to zero enforcement of nanny laws in NYC (perhaps because there are benefits to the overall economy of the city). Exception being clear cases of abuse.
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