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Don’t Get Stuck in a Nannygate Tax Situation


Don’t Get Stuck in a Nannygate Tax Situation

Remember Zoë Baird? She was on track to be the first female U.S. attorney general in 1993, when it was revealed that she had failed to pay the “nanny tax” for her household employee. She wasn’t the first person whose career was sidetracked by this issue, and she’s also not the last.

Kiplinger’s recent article, “Paying Taxes for a Hired Caregiver,” says that now we have Congressman Mick Mulvaney, who was President Donald Trump’s choice to run the Office of Management and Budget (OMB). Congressman Mulvaney admitted that he failed to pay five years’ worth of taxes for the woman he and his wife hired in 2000 to help take care of their triplets.

 There was also Andrew Puzder. Once he was nominated as Labor Secretary, he disclosed that he hadn’t paid the required taxes due for a household employee who was illegally in the U.S. Both men stated in their confirmation hearings that they’d paid the back taxes they owed the government.

Remember that the nanny tax isn’t just for Mary Poppins, a whimsical movie role played by Julie Andrews who was in charge of a banker’s kids. The so-called nanny tax covers any household employee, like a housekeeper, landscaper, or—of particular interest to us here—the caregiver for your spouse or elderly parent. If the caregiver is provided through an agency or is self-employed, you don’t have to be concerned. However, if you hired the individual yourself and control the type of work that is done, you’re most likely considered to be an employer in the eyes of the IRS.

If you hired the caregiver and control his or her work and if you paid more than $2,000 last year, the nanny tax applies. When you file your tax return, you are required to include a Schedule H and pay the 15.3% Social Security and Medicare tax on the wages you paid. The tax is supposed to be split evenly between you and your employee, but whether you withheld the tax from your employee’s wages during the year or not, you’re responsible to pay the full amount when you file your return.

There’s more: if you paid more than $1,000 to any household employees during any calendar quarter in either 2015 or 2016, you also owe the federal unemployment tax and depending on your state, you may owe state unemployment tax.

Provide your employee with a W-2 that shows wages paid and any withholding taxes (these were due at the end of January) and make sure to send a copy to the Social Security Administration.

After all, you never know when the inspiration to enter public office may strike, and you wouldn’t want this detail to derail providing service to your community!

Do you live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help!  Come visit for more information.

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Reference: Kiplinger’s (March 2017) “Paying Taxes for a Hired Caregiver”

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.