I am a nanny paid under the table... Help!?

Question

And it is soon going to be tax time. I have been working for a family for the past 11 months, and I am paid "under the table". No taxes taken out, nor have I ever put any of the money away simply because I need it all! (Rent and bills are extremely important!) I have spoken to my boss about this, and she says she is going to give me a 1099. After some online research, I have realized this is a big no-no, and allows the family to get away with not paying what THEY owe, which in return, makes me pay more in the end.

Now, my income is roughly $510-$520/weekly at 45hrs a week which is approx. $2,040/month.

Recently I was involved in an accident and now I work 42hrs a week. So the income is less. Either way, I am getting nervous that tax time is coming up because I don't want to get screwed. Everyone keeps telling me I'm going to owe a lot, and it worries me because I know it's going to be tough to pay it! My boss has told me they have been audited for the past 2 yrs. Obviously that isn't something she shouldn't of told me, but knowing that makes me even more nervous. She says she's going to help me with the 1099 for my gas expenses, etc. But either way, do I trust this? I don't want to lie on any forms and get myself in troube as they obviously have. And may I remind you all, they are quite wealthy. Do I request a W-2? Is that going to be more confusing for me? I don't have an EIN. I have been a nanny for about 2 1/2 years now, but my jobs were always in between tax-paying jobs & for short amounts of time, so it was never filed. This time... I HAVE to file something!

I would GREATLY appreciate as MUCH advice as possible!!
Thank you! :)

Answer 1

Unfortunately you cannot get a W-2 since your employer has not been paying the usual taxes out of your pay checks (Social Security, Federal and State Taxes etc)



I worked for a job once where I got a 1099 at the end of the year, I owed almost $3,000 to the IRS and the state I lived in. This was a part time job that I was working for at the time.



I highly recommend that if your employer is not willing to pay the taxes out of your paychecks though out the year, that you do one of two things...either put 20% from every check into savings for taxes or find another job where you can get a W-2 instead of a 1099.



Good Luck!

Answer 2

Paying Nanny Under The Table

Answer 3

Well, of course the 1099 is so they can avoid paying their share of the taxes. Assuming you are working in their home, yes they should have been withholding tax, and paying the required employer taxes, and should be giving you a W-2 as a household employee. And I have to ask, where were you all year - knowing nothing was being withheld, thinking it was under the table and you'd get away with not paying any tax on your income - that's called tax evasion, you know. So you were both in the wrong here



You have some recourse on the issue of 1099 vs. W-2. You can file a form SS-8 with the IRS asking for a determination of your status. You'll be declared a household employee, and they'll be responsible for their share of the tax, plus some penalties. But that doesn't get you off the hook for the taxes that you should have paid, and didn't.



$2040 a month for 11 months is around $22,440. Federal income tax on that will be around $1620. Social security and medicare together for an employee is 7.65%, which is $1717. So at best you will owe $3337, and need to start figuring out how you will pay that. You owe that in any case, plus penalties for underwithholding.



If you just take the 1099 and don't file the SS-8, then you'll owe $3170 for self employment tax instead of the $1717 for social security and medicare that you'd have paid if they had been taking out taxes properly, so you'd owe more like $4790.



You say in your question that you've been evading taxes for other jobs you've had. Well, sounds like it just caught up to you. You can file the SS-8, and there isn't much question, your employer will have to pay their share, plus penalties to the IRS. But in any case, you still will owe the $3337. You don't get off scot-free on this either. And depending on where you live there is very likely also state and/or local taxes.



I know this isn't the answer you were hoping for. And the responders who said that if you don't live in, they can call you an independent, are not correct - it's where you actually watch the kids, and my answer assumes that was in their home, not yours.

Answer 4

A 1099 is submitted to subcontractor not an employee. You are an employee.



Nanny jobs and other domestic work arrangements are virtually always classified as household employee relationships. This means that the nanny or au pair is granted full employment rights and obligations, which differ substantially from those of an independent contractor.



What is the difference between Employees and Independent Contractors?



This is generally defined by the work relationship; how much direct oversight or “control” the person hiring has over the person doing the work. If an employer is able to control the schedule and number of hours worked, as well as provide instructions as to the specific way in which the work is completed, this is considered employment.



But if the person doing the work sets her own schedule, avails her services to the general public, and is only obligated to complete a job and not directed much as to how, then she is considered an independent contractor.



She is trying to screw you over, taking the tax deduction at your expense. Tell her you will not accept a 1099. She'd be better off not reporting your income at all. She can't legally get away with filing a 1099 if you fight it. And if she wants to consider you an employee then she will have to pay social security taxes and she should have been withholding federal and state taxes from your paycheck.

Answer 5

Spend about $50 for a tax software program like Taxcut or TurboTax.

Enter all the wage information you have.

Go through the entire federal return and enter all the required information.

If you kept records of taxes paid,any medical expenses including insurance premiums,you can enter them.

It will start calculating your taxes and any refund you may have coming or your possible tax liability.

If your employer gives you a 1099,you can use that instead of a W-2 and claim self employed wages.

Any taxes due (social security,medicare and income) will be calculated and you can send a check or money order with your return to pay them.

Then download a state return if your state requires you to file one.

The program will transfer your federal data to the state program automatically.

Add information as needed in the state program and it calculates your state tax liability for you.

If you need to make payments because you don't have the money necessary to pay any taxes due,it will help with that to and the necessary forms.

You only have to file a return by the April deadline and pay a part of taxes due.

The sooner you start the sooner you can see what your tax liability will be and the more time to get the money together.

You can then use the tax program to estimate your tax liability for 2009 and you can then put so much money aside each payday to help pay your taxes for 2009.

Answer 6

It's common. And of course illegal. And paying half and half doesn't make it any less illegal. It's best to find a job where the people do things legally. You can ask them for whatever you want to. Doesn't mean they're willing to go higher, Plus I don't know if I'd want someone watching my kids who essentially said "If I can't break the law and evade taxes, I need more money." You do understand that if you're paid under the table, you're still required to report it on a tax return, and not reporting it is illegal and tax evasion for YOU?

Answer 7

OK, do you live in--assume not because you have rent. If you live in, they have to pay the Nanny Tax.

You live out and they pay you, you are independent contractor. If they are issuing you a 1099, you are NOT being paid under the table, they are reporting the income and attempting to get child care tax credit for themselves, and if they're eligible for that, they're not that wealthy.

You make more than $400 self employment and you are REQUIRED to file a tax return, no matter total income amount. You are required to report everything you made and you will have to pay self-employment taxes, about 15%, plus FIT and SIT, so start saving. If you have expenses, you can reduce the taxable amount of your income. If you are reimbursed for expenses, they are not deductible, but the money is not taxable either.

YOU have been guilty of tax evasion and or tax fraud by working as nanny and NOT reporting your income. Your bosses being audited does NOT mean they are guilty of tax fraud. You should have settled these issues with employer before you started working for them, and whether you are self-employed or W-2 has an impact on pay you accept.

www.irs.gov self employment, schedule C and SE

Answer 8

If you give care in their house, you are a household employee, and they should be giving you a W-2, and not a 1099.



There are lots of ways to handle this. One of the simplest is to file http://www.irs.gov/pub/irs-pdf/fss8.pdf . Do it quickly. That will get the IRS investigation. (Note: only after filing the SS-8, you can consider filing Form 8919 http://www.irs.gov/pub/irs-pdf/f8919.pdf with your tax form)

Also check out http://www.4nannytaxes.com/forms/form-ss8-sample.pdf for a sample.



Another way, if you file for unemployment, the state will investigate.



Give your boss your W-4, implying that you expect a W-2, not a 1099.

Answer 9

Wow... I don't know anything about this myself, but I think you should get in to see an accountant ASAP. Even if it's just like H&R Block or something. This is something you don't want to mess up on!