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The Nanny Tax Nightmare: Risks in Paying Domestic Workers Under The Table

The Nanny Tax Nightmare: Risks in Paying Domestic Workers Under The Table

What’s on your list of “must-haves” for your dream job? A paycheck, perhaps?

Maybe that didn’t make your list, because getting a legitimate paycheck seems like a given. Companies are supposed to pay employees by the books; not under the table. Sure, some people hand their house cleaners cash at the end of each week — but they’re not companies, so that’s different, right? Actually, it’s not so different at all.

Hiring household help on an ongoing basis, in which the worker does not offer services to the general public, categorizes you as a household employer. That means your domestic workers are your employees — and they’re entitled to the same benefits as all non-exempt employees, such as being paid time and a half for overtime work. It also means you’re both required to pay Social Security, and Medicare taxes, if you pay your employees over $2,000 a year.

Many households get around these rules — sometimes unknowingly — by paying “under the table,” and not reporting the household payroll on their taxes. In the eyes of the law, this is tax evasion; and it comes with some serious consequences for both the worker and the household employer.

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How Common is Paying Under the Table?

Only about 250,000 households in the U.S. report household employee wages, even when workers like nannies providing childcare services  should be reported as a W-2 domestic employee.

According to the IRS, Schedule H filings have declined, even though the Bureau of Labor Statistics (BLS) reports that child care worker and home health aide positions are growing. Although there are many factors at play, tax evasion is likely a main cause of this discrepancy — less than 9% of surveyed domestic employees worked for an employer who paid into Social Security.

Overall, it’s estimated that up to 75% to 95% of people who employ domestic workers don’t pay employment taxes. That’s a lot of people who could find themselves in serious legal trouble — and the plea of “everyone’s doing it” won’t hold up in court.

What Are the Ramifications of Paying Under the Table?

Okay, so you pay your house cleaner or nanny in cash. You know that she’d rather get the cash up front, so she’s not going to report you — if no one finds out, it’s no problem, right? Well, not quite.

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Whether you get caught paying under the table or not, there are still more downsides than upsides to it. Your housekeeper or nanny won’t have access to things like workers’ compensation, disability benefits, unemployment insurance, Medicare, and Social Security — benefits offered by the government for long-term protection and income stability. This makes it quite difficult to plan for a future and retirement, with no access to Social Security. For domestic workers supporting families of their own, being paid under the table leaves them no way to keep their families financially stable if they become injured, or lose their job.

Your household workers will also lack access to certain loans and rental opportunities, because they have no official history of employment — something you may have taken for granted when you applied for your last car loan, or your apartment lease.

Paying the appropriate taxes comes with benefits for you, too. Household employers can qualify for certain tax breaks when they report their taxes accurately, which helps offset the cost of paying taxes in the first place. Many households can take advantage of the Child and Dependent Care tax credit, which is only available if you pay your nanny tax.

You can actually minimize the cost of your nanny tax, if your employer offers a Flexible Spending Account — a program that allows you to withhold pre-tax money from your paycheck, to pay for child care costs. This may end up offsetting your nanny tax costs completely. Ask your HR department if your employer offers an FSA as part of your benefits package.

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By paying your worker legally, both you and your employees can rest with peace of mind knowing you won’t be slapped with penalties if you’re audited. If you don’t pay proper taxes, you could end up with:

  • Tax evasion charges
  • Liability for both the employer and employee portions of FICA
  • Back taxes, with penalties and interest
  • Felony charges for tax evasion
  • Loss of a professional license

On average, you’ll pay around $25,000 in fines and penalties when you don’t pay employment taxes for your nanny, housekeeper, or other household worker. Aside from the financial penalty, getting caught for tax evasion has a wildly detrimental effect on your image — especially if your job involves being in the public eye — which can lead to a huge financial loss in your business, or even loss of your job. On top of that, doing the right thing for the people that care for those you love should be a priority. Take care of the people who care for you and yours.

How Can You Get Caught?

It may seem unlikely that you’ll get caught, but there are actually many situations that can expose your tax evasion — more than you might realize. Here are just a few examples:

  • If you misclassify your employees as independent contractors, and issue them a 1099 (opposed to a W-2), you can be charged with tax evasion.
  • If you don’t file your share of Social Security, Medicare, and unemployment taxes; but your employee files their own income taxes, there’s a good chance the IRS will look into it.
  • If you let your nanny go, and she later files for unemployment benefits, she must list her past employers — including your family. The unemployment office will investigate, and find that you didn’t file tax returns, or pay unemployment taxes. You’ll be audited, and your nanny will be declined benefits.
  • If your caregiver is injured at work and goes to the ER, your lack of workers compensation insurance will be exposed.

Note: There is no statute of limitations on failing to pay federal payroll taxes.

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How to Avoid Penalties

If you employ household workers, you need to follow specific a process to properly file your payroll taxes. Start with these steps:

  • Register with the IRS. You must register yourself as an employer to properly file taxes. To do this, apply for an Employee Identification Number (EIN). Then, you will need to report who is working for you, and where the work occurs.
  • Verify that your workers can legally work in the U.S. It’s against the law to hire a household worker who cannot legally work the U.S. It’s your responsibility to verify that the person you hire is a U.S. citizen, or a non-citizen who can legally work here. You must each fill out the Form I-9, and keep it in your records. This helps protect you, if your employee’s right to work ever comes under question.
  • Withhold and remit the employee’s taxes. Domestic workers can choose to have their taxes taken out of their paycheck before they receive it. As a household employer, you are not legally obligated to do so; but it’s encouraged, as it makes paying taxes easier.
  • Pay your portion of payroll taxes. Like any employer, you are responsible for your share of Social Security and Medicare taxes. You must withhold 7.65% from your employee’s paycheck, and you’ll also have to match that number with your own money.

If all of this seems overwhelming, there are many outsourced payroll solutions that exist to help you, for this very purpose. An outsourced company can handle the finances, taxes, and legal intricacies of household employment — so you can pay your employees and taxes confidently, without fear of penalty.

Featured photo credit: Shutterstock via shutterstock.com

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Kathleen Webb

Co-Founder, HomeWork Solutions

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Last Updated on June 24, 2019

15 Easy-to-Make Crockpot Freezer Meals for Busy Nights

15 Easy-to-Make Crockpot Freezer Meals for Busy Nights

You work all day, and you come home exhausted and hungry. Naturally, the last thing you want to do is to spend hours in the kitchen cooking dinner. If you love cooking, but your busy schedule doesn’t allow you to cook every night, you can simplify your life by making crockpot freezer meals. These meals will allow you to still eat homemade, healthy, filling dinners without the countless hours and enormous effort spent in the kitchen. You can store the simple ingredients in freezer bags and put them in the crockpot when it is time for dinner, or you can cook over the weekend and stock your freezer with delicious ready meals that will make your life easier. Here are 15 easy-to-make recipes to make delicious dinners for busy nights!

1. Cheesy Tortellini With Ground Beef

Cheesy tortellini with ground beef

    This is a perfect crockpot freezer meal that even your kids will love. The best thing of all is that it’s incredibly easy to prepare. All you have to do is crumble some ground beef and combine all the recipe’s ingredients in your crockpot. The other ingredients needed for this super delicious meal include tomatoes, herbs, and onions. Tortellini is one of the most commonly ordered meals when eating out, but this way you will get to eat a homemade, healthier version of the popular dish. Find the recipe here.

    2. Cranberry Pork Roast

    Cranberry pork roast

      Cranberry pork roast is a gluten-free meal that everyone can make, regardless of their culinary skills. The dish requires only these few ingredients: onion, cranberry sauce, bone-in pork shoulder, and honey. To prepare this mouthwatering dish, simply combine all the ingredients together in the crockpot and let them cook. If you don’t like pork or if you prefer not to eat it, you can easily use beef as a substitute without impacting the flavor. Click here to see the recipe.

      3. Greens and Beans

      Greens and beans

        Greens and beans are the ideal dishes if you want a dish that is both delicious and nutrient-dense. Combine vegetable broth with beans, garlic, kale, escalore, and Parmesan, and let cook. The result will be a dish with a soup-like consistency that will fill you up and provide you with a lot of vitamins and minerals.

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        As a bonus, if you or someone else in your family suffer from rheumatoid arthritis or some other common types of arthritis, greens and beans can reduce the inflammation. That’s because kale and other veggies rich in Vitamin K are anti-inflammatory and are known for relieving arthritis. Click here and start cooking!

        4. Chicken Curry

        Chicken curry

          That is yet another gluten-free recipe that you’ll love to make. Chicken curry requires basic ingredients such as tomato paste, coconut milk, honey, onions, and garlic, in addition to chicken and curry of course.The result is a sweet and spicy dish where different flavors are perfectly balanced. Find the recipe here.

          5. Honey Sesame Chicken

          Honey sesame chicken

            Honey sesame chicken is a simple and effortless dish that delivers an amazing taste. To make this wonderful recipe, you have to combine all the ingredients except for the sesame seeds and green onions and let them cook. Use the sesame seeds and green onions for garnish when serving. Click here for the full recipe.

            6. Mushroom Spinach Stroganoff

            Mushroom spinach stroganoff

              In this warm weather, many people opt to eat lighter food that is easy on the stomach. Mushroom spinach stroganoff fits the bill being a vegetable version of a famous comfort food that you and your family will love. The dish requires simple ingredients such as sour cream, onion, garlic, ketchup, vegetables, and mushrooms. This dish is very simple to make, and thanks to your crockpot, you won’t have much work to do. Find the recipe here.

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              7. Stuffed Peppers

              Stuffed peppers

                If you’re looking for a healthy, simple, and delicious recipe, you’ll love this one! These crockpot stuffed peppers are easy to make, and they require only a few ingredients such as ground turkey or beef, onion, garlic, bell peppers, and pasta sauce. This meal will remind you of grandma’s kitchen. You can find the recipe here.

                8. Cilantro and Lime Chicken

                Cilantro and lime chicken

                  Summer is the perfect season to experiment with more exotic flavors, and this meal can help you do just that. To make cilantro and lime chicken, you will need to combine some simple ingredients such as lime, jalapeno peppers, fresh cilantro, and salsa. The result is chicken that is super tender and that you’ll want to make over and over again, so get the recipe here.

                  9. Beef Fajitas

                  Beef fajitas

                    This is an excellent meal for busy weeknights. The best thing about this recipe is that the required ingredients are probably already there in your kitchen. The recipe is also quite simple — combine all the items in a crockpot, cover, and let cook.

                    The result will be beef and peppers that melt in your mouth. You can easily pair this beef fajita with rice and tortillas and get a meal that the entire family will love. You can find the recipe for this delicious beef fajita here.

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                    10. Asian Chicken Lettuce Wraps

                    Asian chicken lettuce wraps

                      Asian chicken lettuce wraps are sweet, slightly salty and very easy to make. All you need to do is add the chicken, red bell pepper, carrots, soy sauce, honey, garlic and the other ingredients to your crockpot and let them cook. You can also replace the chicken with beef or turkey if you like. The presence of different flavors gives this meal a summer flavor you are sure to love. Learn how to make this meal here.

                      11. Hawaiian Chicken

                      Hawaiian chicken

                        This dish enjoys phenomenal exotic tones due to pineapple and lemon flavors. To make this yummy crockpot freezer meal, you need skinless chicken breasts, peppers, ginger and corn starch, in addition to the iconic pineapple and lemon. Learn how to make this perfect summer dinner here.

                        12. Beef and Barley Stew

                        Beef and barley stewd

                          Beef and barley stew is as healthy as it is delicious. Not to mention it’s incredibly easy to make. Besides the beef and barley, you’ll also need carrots, peppers, herbs and beef broth. The result will be a mouthwatering stew that you can serve alone or over white rice. Get the recipe here.

                          13. Meatball Soup

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                          Meatball soup

                            This soup is very delicious, easy to make and quite versatile. You will be able to swap ingredients and experiment to find your perfect combination. To make this meatball soup, you will need to combine meatballs with pasta sauce, chicken broth, carrots, beans, zucchini, and onion. You can view the recipe here.

                            14. Turkey Black Bean Chili

                            Turkey black bean chili

                              Everybody loves chili and for good reason — it’s very delicious, and it’s a perfect combination of different flavors that balance each other out. To make this chili, you’ll need ground turkey, tomato sauce, black beans, paprika, frozen corns, and a few other ingredients. You can get the full recipe here and have this delicious dish ready when you come back from work on those busy nights.

                              15. Ham and Pinto Bean Soup

                              Ham and pinto bean soup

                                What makes soups special is the fact they’re tasty, healthy and filling at the same time. This soup is no exception. The best quality of this ham and pinto bean soup, however, is its simplicity; it requires only five ingredients: ham, beans, ketchup, salt, and water. Learn how to make this soup here.

                                Conclusion

                                With a demanding work week and a busy schedule, it’s normal to have a low energy level by the time you get home. If you don’t feel like standing in the kitchen and cooking dinner due to this, you don’t have to resort to junk food. These freezer crockpot meals offer you the perfect solution for healthy meals that require minimal preparation. You can either combine each recipe’s ingredients in a freezer bag to be thawed and cooked in a few minutes, or you can cook your meal and freeze it to be used later, it’s up to you.

                                This article showed you 15 easy and simple recipes that you can make using your crockpot. All of these recipes contain anti-inflammatory foods whether it is in the form of vegetable, herbs or spices to improve your overall health and wellbeing.

                                Featured photo credit: Google via bettycrocker.com

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