I don't want to screw myself over more than I already have...
February 7, 2016 2:40 PM Subscribe
I worked as a part time nanny for the first half of this year, but I stupidly accepted being paid under the table. How do I pay taxes now?
I have W2s for other positions and that's no problem, I don't know what to do with this other significant chunk of income when filling though.
Am I going to have to contact the family I worked for? I'd really like to avoid it, but if it's a must I will...
I live in Illinois.
I have W2s for other positions and that's no problem, I don't know what to do with this other significant chunk of income when filling though.
Am I going to have to contact the family I worked for? I'd really like to avoid it, but if it's a must I will...
I live in Illinois.
I am not a tax attorney, and am certainly not your tax attorney. That said, IRS Publication 17, Chapter 5 talks about Wages, Salaries, and Other Earnings and specifically mentions childcare providers. "If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it." So you can probably make this right by claiming to be self-employed and filling out Schedule C or C-EZ. This will leave you on the hook for paying your entire social security obligation as self-employed, but you will have declared your income and paid taxes and that will almost certainly be the end of the matter.
Because you probably showed up when you were told and did what you were told, you probably were actually an employee. Legally, if they paid you more than $1900 your employers should have deducted social security from your wages and matched them (which would reduce your own social security burden on the same income), and they should have sent you a W2. deadweightloss describes what you need to do if you decide to go this route.
But whatever you do, DO NOT consider simply not declaring the money. That can have serious consequences in the future,
posted by ubiquity at 3:08 PM on February 7, 2016 [3 favorites]
Because you probably showed up when you were told and did what you were told, you probably were actually an employee. Legally, if they paid you more than $1900 your employers should have deducted social security from your wages and matched them (which would reduce your own social security burden on the same income), and they should have sent you a W2. deadweightloss describes what you need to do if you decide to go this route.
But whatever you do, DO NOT consider simply not declaring the money. That can have serious consequences in the future,
posted by ubiquity at 3:08 PM on February 7, 2016 [3 favorites]
Some years ago I was paid in cash for various jobs and I just put it on my taxes as self-employment earnings. It did mean I had to pay more in taxes but it worked out ok. I didn't have to list anywhere who had paid me.
posted by mareli at 3:09 PM on February 7, 2016 [2 favorites]
posted by mareli at 3:09 PM on February 7, 2016 [2 favorites]
If your nanny employer paid you more than $1900 in 2015, then they are legally obligated to pay FICA taxes and issue you a W-2. In that case, as "deadweightloss" explained above, you may need to file Form 4852 to report your former employer for failure to issue a W-2. You should immediately call the IRS at 1-800-829-1040 and be prepared to provide them with your employer's name, address and phone number. Read the instructions on Form 4852. Either the employer will give you a correct W-2 or else you will file the Form 4852 as a substitute for a W-2. Beyond that, it is your employer's problem. They are in trouble but not you for a tax violation regardless of what you "agreed" to.
If less than $1900 as a household employee, then you are not required to pay FICA tax on that income and no W-2 is required. But you must pay income tax on that income. You do this by adding your nanny earnings to your total for other W-2 wages on Line 7 of Form 1040. In the space to the left of that total write "HSH $xxxx" where xxxx is the subtotal of your household employee income. This is to distinguish the nanny income from regular W-2 income.
posted by JackFlash at 3:53 PM on February 7, 2016
If less than $1900 as a household employee, then you are not required to pay FICA tax on that income and no W-2 is required. But you must pay income tax on that income. You do this by adding your nanny earnings to your total for other W-2 wages on Line 7 of Form 1040. In the space to the left of that total write "HSH $xxxx" where xxxx is the subtotal of your household employee income. This is to distinguish the nanny income from regular W-2 income.
posted by JackFlash at 3:53 PM on February 7, 2016
I wouldn't normally suggest this, but:
Do you believe there is any reason your taxes will be audited?
posted by samthemander at 5:22 PM on February 7, 2016 [2 favorites]
Do you believe there is any reason your taxes will be audited?
posted by samthemander at 5:22 PM on February 7, 2016 [2 favorites]
I am self-employed and have a lot of clients, many of whom are individuals and who may not realize that they should send me a 1099. You can also file as self-employed and declare the income even if you don't have a W-2 or a 1099 that says exactly how much you made, and you don't have to identify your employer by name.
posted by lgandme0717 at 5:26 PM on February 7, 2016
posted by lgandme0717 at 5:26 PM on February 7, 2016
You can also file as self-employed and declare the income even if you don't have a W-2
But in that case the employee would be responsible for nearly 15% in payroll taxes in addition to income tax. That 15% tax was supposed to be paid by the employer to the IRS. The employer is responsible for paying both halves of the payroll tax.
If the employee is still working for the employer, the employer can attempt to recoup the employee half from a future paycheck but otherwise the employer is stuck paying both halves, one of the risks of failing to report properly.
posted by JackFlash at 6:11 PM on February 7, 2016 [2 favorites]
But in that case the employee would be responsible for nearly 15% in payroll taxes in addition to income tax. That 15% tax was supposed to be paid by the employer to the IRS. The employer is responsible for paying both halves of the payroll tax.
If the employee is still working for the employer, the employer can attempt to recoup the employee half from a future paycheck but otherwise the employer is stuck paying both halves, one of the risks of failing to report properly.
posted by JackFlash at 6:11 PM on February 7, 2016 [2 favorites]
Keep in mind that the agreed on salary included the amount that they were saving by paying you under the table. Since you changed your mind, you should reimburse them for the difference if you expect them to file properly. You should also research how they should do it, because they probably don't know.
posted by myselfasme at 6:11 PM on February 7, 2016
posted by myselfasme at 6:11 PM on February 7, 2016
Since you changed your mind, you should reimburse them for the difference if you expect them to file properly.
Absolutely not. The employer is the one in violation of the law. By filing a correct and accurate return, the employee is in full compliance of the law. The employee owes nothing to the employer who was trying to cheat the employee out of their legal benefits -- social security, medicare, unemployment insurance, disability insurance -- and cheat the government of taxes due.
posted by JackFlash at 6:19 PM on February 7, 2016 [27 favorites]
Absolutely not. The employer is the one in violation of the law. By filing a correct and accurate return, the employee is in full compliance of the law. The employee owes nothing to the employer who was trying to cheat the employee out of their legal benefits -- social security, medicare, unemployment insurance, disability insurance -- and cheat the government of taxes due.
posted by JackFlash at 6:19 PM on February 7, 2016 [27 favorites]
I was in this position when I was just out of college and nannied part time for a family over the summer to fill in for a friend who was their regular nanny. They paid me via personal check, nothing withheld. The amount they paid me alone was more than enough to qualify me as a household employee, even though it was only for three months (this was 10 years ago in WA). I hired someone to help me with my taxes because I had income from another part time job and a bunch of acting gigs plus education expenses. The tax accountant insisted I call them (as awkward as it was) and tell them I qualified as a household employee and they had to pay a share of my payroll taxes. They were not pleased, but that was their problem for not abiding by the rules. Nonetheless I was out a fair chunk of change for my share of payroll taxes. That was a lesson about putting aside savings from each paycheck.
TLDR: Don't feel bad about filing your taxes properly. They are on the hook for their fair share.
posted by Pearl928 at 7:25 PM on February 7, 2016 [3 favorites]
TLDR: Don't feel bad about filing your taxes properly. They are on the hook for their fair share.
posted by Pearl928 at 7:25 PM on February 7, 2016 [3 favorites]
I am unsure why you would declare this income if it was "paid under the table". Besides paying additional taxes, you may be getting your ex-employer in trouble if you do so.
posted by eas98 at 12:23 PM on February 8, 2016
posted by eas98 at 12:23 PM on February 8, 2016
I am unsure why you would declare this income if it was "paid under the table". Besides paying additional taxes, you may be getting your ex-employer in trouble if you do so.
The poster didn't ask how to commit tax fraud in a conspiracy with their employer who is also committing tax fraud. They asked how to pay their taxes as required by the law. They will be doing their employer a favor by encouraging them to also pay their taxes. Nobody has committed a crime yet, but if either intentionally signs and files a fraudulent return, then it is too late.
posted by JackFlash at 4:08 PM on February 8, 2016 [3 favorites]
The poster didn't ask how to commit tax fraud in a conspiracy with their employer who is also committing tax fraud. They asked how to pay their taxes as required by the law. They will be doing their employer a favor by encouraging them to also pay their taxes. Nobody has committed a crime yet, but if either intentionally signs and files a fraudulent return, then it is too late.
posted by JackFlash at 4:08 PM on February 8, 2016 [3 favorites]
Keep in mind that the agreed on salary included the amount that they were saving by paying you under the table. Since you changed your mind, you should reimburse them for the difference if you expect them to file properly.
Oh, I really don't think so. The employers were breaking the law, I don't think the employee has any legal, moral, or ethical obligation to compensate them for this.
posted by Juffo-Wup at 5:38 PM on February 9, 2016
Oh, I really don't think so. The employers were breaking the law, I don't think the employee has any legal, moral, or ethical obligation to compensate them for this.
posted by Juffo-Wup at 5:38 PM on February 9, 2016
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You're going to have to essentially report the family for paying you under the table, however. If you explicitly agreed with the family to be paid under the table, you probably owe to them to tell them you've changed your mind and that you'd like a W2 and for them to pay their portion of the payroll tax. This will give them a chance to get their paperwork in order with a penalty that may be lower than if you report them to the IRS.
posted by deadweightloss at 2:57 PM on February 7, 2016 [2 favorites]