7 Steps to Help Clients Follow Nanny Tax Laws

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If your client has or is hiring an employee, like a nanny or housekeeper, to work in their home, there are a few actions they should take to stay out of trouble with federal and state agencies.

Here are some practical steps to make your (and your client’s) life easier come tax time. Most of these can be taken before their employee even starts work.

1. Use the “Employee” Classification
The IRS has consistently ruled that a household worker is an employee and not an independent contractor. It’s really quite simple. The family provides instructions, sets the worker’s schedule and provides the tools and equipment to do the job. If there is any doubt, the family can file Form SS-8 with the IRS for a determination of the worker’s status.

Misclassifying a household employee as an independent contractor is considered felony tax evasion. Domestic workers should receive a W-2 at the end of the year, not a 1099.

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About Guy Maddalone

Guy Maddalone

Guy Maddalone has more than 30 years of experience in the payroll, human resource, and employment services industries. In 1991, he founded GTM Payroll Services to provide payroll, tax, compliance, and insurance administration for families that hired a nanny or other household employees. Guy is also the author of How to Hire a Nanny and How to Hire a Caregiver for Your Senior.

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