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Under-the-table nanny pay hurts caregivers and employers

Nannies and other caregivers who make at least $1,900 annually are considered households employees. That's not a lot of income by Michigan standards but it is enough to cause tax problems with federal and state governments, if the income goes unreported. No one likes complicating his or her life, but there's no way around this obligation.

Household employees and the people who hire them may be in the dark about this so-called Nanny Tax law. Unfortunately, some Troy caregivers encounter employers who would rather pay them off the books rather than deal with the tax situation honestly. That puts an employee in an awkward position – cheating the government is illegal but complying with the rules might mean losing a job.

The best time to address household employee taxes is prior to hiring. By waiting until you start working, it may be difficult to change the way an employer pays you. Remember, by accepting under-the-table pay, you also may be compromising future benefits like Medicare and Social Security and creating a pay gap in your employment history.

An employer mistakenly may assume caregivers are contract workers, responsible for paying their own taxes, but that's not true. Taxes for household employees must be deducted and paid by employers. You could be doing an employer a favor by letting them know how these types of taxes are handled.

Of course, there's always the chance you'll run across an employer who deliberately wants to keep the pay a secret and avoid the household employees' tax. You can outline the consequences you'd both face for breaking the law. An employer who doesn't budge may risk an audit, but you still protect yourself from Internal Revenue Service backlash by declaring the income.

You may want to consult a tax professional about resolving under-the-table pay problems. An Akeel & Valentine attorney can offer advice about your legal rights in the face of employment violations.

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