Nanny Tax Nightmares

Many career-minded individuals struggle to balance the responsibilities of raising a family with the demands of the office. The solution is often hiring third party help in the form of nannies, maids, drivers, etc. But no matter what you call them, or what services they perform, the IRS classifies anyone who works in your home, and meets certain other requirements, as a household employee.

Household employers are required to report wages and tax liabilities on Schedule H of the annual Form 1040. Also, in this area, there are specific filing requirements and withholding payment schedules for DC, MD, and VA. According to a recent Washington Post article, failure to comply with these rules can cost you, especially in the upper echelons of government service.

While the calculations and filings are relatively simple, there is often confusion around the requirements the IRS and state agencies impose on household employers. If you currently employ any household workers, or plan to do so in the near future, remember that any household employees paid more than $2,000 in 2016 trigger employment taxes on your personal tax return.

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