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"Ask Your Attorney" Column

About Your Responsibility To Pay The "Nanny Tax"

Dear Counselor: My 92 year old mother lives with us, and since my husband and I both work full time, we hired a domestic worker who comes in part time. She watches over grandma, and while she is there, she cooks and cleans too. It's great, but now I hear I might be responsible for tax withholding, as well as Social Security and Medicare taxes for this person. Is that right? I was just giving her cash.

Dear Client: If you hired the domestic yourself, and direct what work she does, how it is done, and when, then you have a "household employee". Examples can include babysitters, cooks, nannys, house cleaners, maids, drivers, and private nurses. If they earn more than a specified amount during the year ($1,800 in 2013 and $1,900 in 2014) you are required to pay Social Security and Medicare taxes for that person. There are exceptions. For example, workers hired through an agency are not your employee if the agency is responsible for who does the work, and how it is done. Self-employed workers are also not your employee, but they have to control their own work, provide their own tools (such as a lawn care service) and also offer services to the general public. If you find yourself without an exception, and you do have a household employee, income tax withholding is not required but you are responsible for the Social Security and Medicare Taxes -- and that means you are to withhold the employee's share of those taxes from their wages, and you must pay the employer share of those taxes yourself. So, be aware of the rules and your responsibilities -- because you don't want to be on the wrong end of an IRS audit, trying to explain why you did not pay that "Nanny Tax" !

Sincerely,

John L. Maier, Jr.
Robert VanScoyocs

Sweet & Maier, S.C., Attorneys
114 Church St.
Elkhorn, Wisconsin
262-723-5480
www.wisclaw.com

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