under the table, off the books nanny. You could be disbarred and you know it.
October 2, 2011 8:34 AM   Subscribe

I work as a nanny. I work part time for 3 different families. They all know that nannying is my full-time career. Everyone's paying me off the books right now. They all should know better, one family is 2 lawyer parents. I want to pay taxes. Can I? I'm pretty sure I won't owe any taxes because I make so little and when paid legally I never have but the families I work for definitely owe their share on my wages. Will the families I work for all get audited if I try to file? What happens? Should I try to tell them that this is my plan? The last time I talked to a family about wanting to be paid legally the gig fell apart, it was a total disaster and I lost the job. I don't want to screw people over but I don't want to get screwed myself.
posted by anonymous to Work & Money (13 answers total) 4 users marked this as a favorite
 
I want to pay taxes. Can I? I'm pretty sure I won't owe any taxes because I make so little

Speak to a tax accountant, and bring whatever documentation you have (if you can put together from your bank records your total cash payment, so much the better). You may be in a situation where you need to file but don't end up owing anything. The thing you most want to avoid is ending up in a situation years down the line where you have to reconstruct your earnings for a period where you were only paid in cash.
posted by Inspector.Gadget at 9:03 AM on October 2, 2011


You should be receiving some advantage that offsets the disadvantages of being paid under the table -- are you; are you being paid more money than you would be if paid legally, or getting any other considerations?

Either you are, in which case...do not screw the families over, or you are not, in which case, have the totally reasonable conversation with them about how the situation needs to change.
posted by kmennie at 9:16 AM on October 2, 2011 [1 favorite]


We pay our nanny on the books, so I am pro-on-the-books.

In my opinion, since you already are off the books, you might have some problems asking them to change things.

(Also, are they legitimately paying you for your time? Cuz once you're on the books, they're on the hook more for paying you time and a half for anything over 40 hours a week, and they're going to have to keep track of your hours better.)

*But remember that you will have an easier time finding a new gig than they will finding a new nanny, so you have some power.*

So....
I would ask to get a meeting with them and tell them that you want to be paid on the books for everyone's protection. Give them 3-4 solid reasons why you want to be paid on the books:

- you want to ensure that you're contributing to social security (and your employers should be paying into that)
- you want to protect yourself in case you're even audited
- you want to make sure that you're generating unemployment and disability in case anything happened to you

- you want to take an online class next semester and the university is requiring you to submit financial aid paperwork and your lack of documented income is prohibiting you from being accepted to the university


If you want, memail me and I'll show you our contract for our 3-family nannyshare and the Google spreadsheet that we use to keep track of Nanny's hours and paying her social security and other stuff.
posted by k8t at 9:20 AM on October 2, 2011 [8 favorites]


And if you have a sense of WHY they prefer to pay off-the-books, make sure to address those concerns.

I'd guess that they think that it is cheaper to pay you off-the-books. But as it stands, they can't use any pretax money OR get a childcare credit on their taxes (thousands of dollars.)

They might like off-the-books because it is less paperwork for them.

They may like off-the-books because they can work you overtime without any documentations.

They may like off-the-books so that they can bail at anytime.
posted by k8t at 9:24 AM on October 2, 2011


IANYL but ... tax law not only permits, but requires, you to file taxes and declare all your income, whether or not under the table. If you know that payroll and income taxes are not being withheld from your wages, you also have an obligation to pay quarterlies. This is quite independent of any duty of your employers to take such withholding, make and file W2s or 1099s, etc. Of course, you stand a good chance of getting your employers in trouble were you to file with the "missing W2" / "missing 1099" boxes / forms in effect.

It's a fixable problem though, because this is a pretty common issue for employers of domestics to encounter. Being "on the books" qualifies a domestic for all kinds of welfare benefits targeting the "working poor" -- most importantly the Earned Income Tax Credit, but also certain mixed income housing eligibility, welfare to work programs, etc., such that the "cost" (employee-part payroll withholding) is more than worth it.

When I've seen people go "on the books," with their staff, though, employers often take the approach that they can't increase their out of pocket cost. If you are getting $600 in cash now a week, you could keep getting $600 as your gross ... but you would see your taxable gross go down by 10% to cover the "employer" portion of the various withholdings, and another 10% to cover the "employee" portions, i.e. $600 cash becomes a check for $480.
posted by MattD at 10:03 AM on October 2, 2011 [1 favorite]


Not an accountant, but you could probably set things up where you go into business for yourself, get that all legitimate, and just bill your clients for your time. Sort of an independent contractor, rather than an employee of the folks you nanny for.

You are the one responsible for taxes, SS, medicare, etc.; all the clients have to do is keep cutting you a check like they have been, so their objections should be minimal, if any. It's no additional work for them, and far less risk for everyone.
posted by xedrik at 10:18 AM on October 2, 2011 [2 favorites]


I filed as an independent contractor as xedrik suggests. I ended up getting screwed (what a shock, right?) because while they agreed verbally to pay the same half of my social security that I would have owed, when it came time they wouldn't do it. Of course that precipitated me looking for another job, so that wasn't pleasant. If you do this and they say they will, well, be prepared for an unpleasant surprise.
posted by lemniskate at 11:07 AM on October 2, 2011


Are you actually an employee, or are you an independent service provider? I'm not clear on what the families you are working for have to do with your tax status. If they are paying you cash for services then why not just file a 1099 declaring your income?
posted by Mars Saxman at 11:17 AM on October 2, 2011 [1 favorite]


If you decide to go ahead, you will probably want to meet once with a tax accountant to make sure you know what you need to do and what the ramifications might be. The one time I paid an independent contractor and go the social security wrong, they just sent me some form letters. Another time, I just forgot to include some income that got reported by another source. The IRS sent us a letter which included their calculation of our new taxes plus penalties. We paid (since we did owe) and then later we got a similar letter from the state which we also paid at which point the whole thing was finished - no big audit or anything. My guess (based on zero professional knowledge) is that if you file, your employers will not get a full audit but they will be expected to pay the relevant amounts plus interest and penalties as defined by the law. There used to be form for "nanny taxes" that one could file at the same time as the regular 1040. If you are going to do this, you might want to make the change for 2011 and tell your employers in time for them to include in their 2011 return.
posted by metahawk at 2:39 PM on October 2, 2011


Meet with an accountant or some sort of qualified legal/tax aid, for sure. I'm pretty sure you WILL owe some taxes, unfortunately, because pretty much everyone who earns wages in the US has to pay something for social security, if nothing else. Sometimes referred to as "self-employment tax," it's really just the equivalent of the employer contribution.

Nthing - set yourself up in business for yourself and get 1099s from employers, at least as long as you're in this position.

If you voluntarily file for past years as needed to get clear of this, the IRS will (and your state will probably follow suit, if you're in an income tax state) work out payments with you. This is where you really need the tax expert advice, but despite their reputation, the IRS typically doesn't lean on people too hard who come in voluntarily.
posted by randomkeystrike at 7:19 PM on October 2, 2011


I would imagine the chances of changing your situation with a current employer and retaining a positive relationship to be nil.

That said, with the experience and job-acquisition skills you obviously have, you're in an excellent position to change that by transitioning to a new, properly on-the-books employment situation. Focus on that.
posted by dhartung at 9:49 PM on October 2, 2011


Really, there shouldn't need to be any change from the "employer's" perspective. Say the family is currently paying you $2,000 a month for your services, under the table. You set yourself up as a legitimate business: Business license, register with the state, UBI number, the works. You, as "Nanny Company", continue to bill the family for $2,000 a month. Nothing has changed on their end; they're still simply cutting a check each month, only now it's to Nanny Company instead of Jane Doe.

You, on the other hand, do your pat and file your quarterlies with the State, and take care of your Social Security and Medicare taxes, and do your withholding as you pay yourself either as an employee of Nanny Co., or take a draw once or twice a month. The taxes and reporting and all that jazz are solely your responsibility. The family you sit for doesn't have to do anything. I mean, when they hire a plumber to fix the sink, they don't have to give the plumber a 1099 or anything for work done. That's how you're setting up your work relationship, essentially legitimizing the system you have now.

The only catch is that you've been getting all of your wages tax-free up to this point; everything you pocket is net. Now, everything you pocket is gross wages, and your net income will be less after taxes. If you're wanting to retain your current level of net income, you'll have to ask for more money from your employers clients, in the amount that you'll be paying in taxes. This number is not insubstantial, and asking for what could be 20% more money could be a big problem.

So you're left with either eating the difference but finding security in knowing that you're doing the right thing and have your ass covered should the IRS start poking around, or trying to negotiate an increase in money from your former employers/new clients, perhaps splitting the difference, so as to meet them halfway.

But I do think that setting yourself up as a proper business and then simply billing them is the key to minimizing their objections. I mean, if they're paying you under the table now, not doing anything at all for you tax-wise, I really can't see them suddenly filing 1099s for you tomorrow.
posted by xedrik at 8:37 AM on October 3, 2011


Mod note: From the OP:
Most of the responses have been bad legal advice, saying I should file as a contractor/1099. That is not a legal way to file as a nanny. The families are required by law to provide me with a w2. (And I was not asking how to file as a contractor, although I understand how people made that leap.) This link explains. http://www.4nannytaxes.com/faq/NannyIndependentContractor.cfm

What I meant to ask, and perhaps I was unclear, was what the consequences might be for filing the "missing w2" forms. For one family that I work for I will go to the ends of the earth to make sure they don't get in any trouble, including paying back to them their share of my taxes to file and helping them to get it squared away and signing on for another year at no net wage increase in exchange for filing properly going forward.
posted by jessamyn (staff) at 3:48 PM on October 3, 2011


« Older Prepare me to ski   |   SO and I are at an impasse regarding his parents'... Newer »
This thread is closed to new comments.