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ANI Nanny Network Blog

Being Paid “On the Books” Pays off- Part 2

As we discussed in Part 1 of this series, being paid legally and knowing the basics of the tax law, are an important part of being treated as a professional. In this section we are going to show you some real world examples of why being paid professionally pays off!

  • Employment History. A legitimate employment history is critical to daily life. It is required for a car loan, a mortgage, a student loan, a credit card application, a health insurance application, an auto insurance application, future job applications, etc. If your employment is not documented, it’s as if you don’t work.

A Real Life Example:  Jill earns $2,000 per month as a nanny but is paid illegally.  She and her husband applied for a mortgage on their first home.  Since Jill’s employment is not documented, the bank does not count her income – and they cannot qualify with only the husband’s income.  In order to qualify, Jill has to put her salary “on the books” and wait 6 months before submitting a new loan application.

  • Unemployment Insurance. As a taxpayer, you are entitled to receive approximately 50% of your salary for up to six months if you lose your job due to no fault of your own. This benefit is free to you, as your employer pays for the cost of the program through quarterly unemployment taxes.

A Real Life Example:  Jane lost her $500 per week job as a nanny when her family moved.  Since Jane was paid legally, she receives $250 per week in unemployment benefits while she looks for a new job. 

  • Social Security/Medicare Benefits. Every taxpayer contributes 7.65% of their wages into their retirement account with the Social Security Administration. In addition to the employee’s contribution, the employer provides a dollar-for-dollar match. With these employee and employer contributions, plus the compounding of interest over time, employees will accumulate a significant nest egg which will help take care of them in their elderly years. (Nannies who are paid illegally are not entitled to any retirement benefits; sadly, there are many nannies around the country in this situation who will find it financially impossible to ever quit working).

A Real Life Example:  Barb earns approximately $30,000 per year.  Over a 35-year career, she contributes about $80,000 to Social Security.  When she retires, she will receive approximately $375,000 in Social Security benefits during retirement, assuming she lives until age 85. That’s a tremendous investment!

Many nannies don’t discuss this subject with their employers because they’re afraid it will be very expensive and/or difficult for their family.  In reality, doing the right thing can be simple and inexpensive.  Families who pay legally are entitled to significant tax breaks, which offset most – if not all – of the employer tax costs and there are services like Breedlove & Associates which eliminate all the paperwork headaches.

Information supplied by Breedlove & Associates. Founded in 1992 – by household employers for household employers – Breedlove & Associates is a full-service, full-support tax & payroll service.    For more information regarding employment taxes  call 1-888-273-3356 or visit 

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