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5 Ways to Avoid Nanny Tax Problems

1/22/2018

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​Do you remember "Nannygate"? Back when Bill Clinton was president, his nomination of corporate attorney Zoe Baird for U.S. Attorney General was derailed after it was revealed that she failed to pay the "nanny tax" for illegal aliens employed as household workers.

Although you may not move in political circles, it's easy to be tripped up by the nanny tax if you're not careful.

The tax law imposes employment tax responsibilities — including withholding Social Security and Medicare taxes on wages and paying the employer's share — if a household worker's wages is more than an annual amount. The nanny tax threshold of $2,000 for 2017 is increasing to $2,100 in 2018.

Although you may not think of yourself as an employer, if a household worker (such as a maid or gardener) works for you and earns more than that amount, you're responsible for paying a nanny tax.

Follow these rules to avoid nanny tax issues:

1. Make it official. Apply for an Employment Identification Number (EIN) with the IRS. The EIN will be used in your future nanny tax dealings.

2. Meet the employment tax obligations. As an employer, you're generally required to pay Social Security and Medicare taxes equal to 7.65 percent of the worker's wages.

3. Keep detailed records. This is usually a good idea when you have tax obligations. Handle these employment matters in a business-like fashion.

4. Check for liability of other taxes. These could include federal and state unemployment taxes.

5. Remember to file forms. The IRS requires certain forms to be filed. For instance, you must submit a W-2 for a worker for 2017 and send copies to the worker and SSA by Jan. 31, 2018.

Finally, resist the temptation to dodge the nanny tax. You'll have peace of mind if you follow the tax rules in this area. We can help you determine your nanny tax liabilities. Give us a call today.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
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Phone: (630) 320-3720

Monarch Accounting Group Inc
145 Tower Drive, Suite 10
Burr Ridge, IL 60527-7836
Email: [email protected]


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  • Home
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