With taxes due next week, it seems like a good time to refresh on tax laws as they apply to nannies.
Employee or Independent Contractor?
As a nanny, you are always considered the employee of any family you work for (regardless of how many hours). The IRS allows families to employ nannies without putting them on payroll, if they pay the nanny less than $1,700 per calendar year. This law is primarily to allow families to have temporary nannies and not have to deal with payroll. As a nanny, you are required to claim all the wages you make throughout the year. It is a good idea if you do a lot of temporary work to keep a notebook and log all the families you work for, and how much you made. If this is your primary source of income, you will want to keep aside a portion of every dollar to pay for your tax portion in April.
Gross vs. Net Pay:
When looking for a long term job, it is very important to understand the difference between Gross and Net pay. Gross refers to PRE-TAX dollars, and is how most families will make a job offer. Net pay refers to your take home pay after your tax contribution and your employer’s contribution. For more information regarding this click here.
For calculating your Gross vs. Net pay click here.
Legal vs “Under the table” Pay:
Being paid legally and advocating for yourself to be paid legally is extremely important. Not only does it provide you with a verifiable employment history, but you also will have unemployment insurance as well as social security and Medicare benefits. For more information click here.
