Saturday, May 24, 2014

The Benefits of Paying Nanny Tax

Finding the perfect nanny for your family can make life a lot easier and stress-free. Once you have found the right person for the job, it is time to figure out whether you should pay her over the table, or under it. Although you may have friends who have chosen to avoid “nanny tax” by paying under the table, here are some reasons for why you should consider the alternative.

Take the legal route and avoid trouble in future

Many people choose to ignore the fact that not reporting nanny tax is illegal. If you are caught by Uncle Sam, the consequences are pretty serious. You run the risk of imprisonment, huge fines and can be booked on felony tax evasion charges.

Establish yourself as a household employer and file all the necessary paperwork to ensure that you are safe in future. Pay your nanny legally, and you need not worry about expensive IRS audits, wage disputes or other legal complications.

Create a professional relationship and secure your nanny's future

By paying nanny tax, you are establishing a professional relationship with her, while also helping her secure her future. When you meet all the tax requirements correctly, she is covered with protection such as Medicare, unemployment compensation and Social Security Income, that all other professionals benefit from. Being legally employed also allows her to build a credit history and take out a loan.

If you are prepared to pay nanny tax, you stand a better chance of finding a professional nanny. To be employed legally, it is necessary that the nanny should be eligible to work in the United States. A contract binds your relationship. Having a contract reduces scope for confusion and allows easy settlement of disputes, should they arise. This promotes a professional and healthy relationship between you and your employee.

Help yourself through Child care tax break opportunities
All those who pay for child care can claim Dependent Care breaks. These tax breaks should help you offset most of the employer taxes that you have to pay. By submitting the relevant forms you can avail of Child care tax credits and Dependent Care Accounts, and compensate for part of the nanny tax you pay. If you do your research well, you may be able to arrive at a combination that helps you save more and even come out ahead.

Having your nanny taxes in place is a huge relief. Choosing the legal route protects you as well as your employee. It may entail extra paperwork and time, but the effort is well-worth it in the long run.So take the next steap and use our nanny tax calculator in order to estimate the taxes you have to pay.

1 comment:

  1. A tax calculator is important if we wanted to know what amount of tax we are paying.
    Canada Tax Calculator