Kelly Bullis
Are you a two-income household with kids? (If you make enough, you could be a single parent with kids too.) If they are young enough, and you can find one nearby child care facility without a waiting list that you trust to take care of your kids, then this article may be less important to you. Of course, if you have older kids, in and out of school, who can’t go to child care facilities, you should keep reading.
How important is it that your kids are supervised by a single person, someone you have vetted with the same beliefs, child-raising concepts, etc.? One option that many are turning toward is a nanny. That’s right, Mary Poppins. Of course, there is only one Mary Poppins, so you most likely will have to settle for a one of her friends.
Once you’ve decided to get a nanny, you need to know the land mine of tax consequences that await you. First, how much will Mary Poppins cost you? The national average rate of pay is about $800 for one child, $900 for two.
Here’s the first catch. The IRS considers a nanny to be a household employee. That means to hire a nanny, you must now consider yourself an employer, subject to all the rules regular businesses fall under. Social Security, Medicare, unemployment, Modified Business Tax (if in Nevada), and workers comp. Along with all the monthly, quarterly, annual reporting, and tax deposit rules.
Might I suggest a solution that will make your life MUCH simpler? Use an outside payroll service. As an owner of a business and a CPA at that, I outsourced my CPA firm payroll to an outside payroll service. Trust me, if a CPA doesn’t like, nor wants the headaches of doing payroll, neither will you. An outside payroll service is worth it. The cost is quite low. Just do it. I use a local company called Personnel Plus. Others like Paychex and ADP are also an option.
Don’t forget the potential tax breaks. If your employer offers a flexible spending account (FSA), and you have children under the age of 13, you can stash away pre-tax money to pay your nanny. (I haven’t even mentioned elderly day care. If you have an elderly parent you take care of, you can hire a “nanny” to watch over them and the FSA money can be used to pay for that too.)
Also, the Child and Dependent Care tax credit works with a nanny as long as your child is under 13.
There you have it, perhaps hiring Mary Poppins or one of her fellow nannies is an option you should consider. Just do it right by using an outside payroll service. There are plenty of politicians who got burned hiring a nanny by paying cash under the table. So, learn from their mistakes, do it the legal way and save yourself a lot of grief.
Have you heard? Psalm 127:4 says, “As arrows in the hand of a mighty man, so are the children of youth.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.