Austin, Texas (PRWEB) September 12, 2012
When a family hires someone to work in their home, such as a nanny, senior caregiver, housekeeper, personal assistant, etc., the IRS considers the worker to be an employee of the family. As the employer, the family has some tax and legal responsibilities.
According to Stephanie Breedlove, founder of Breedlove & Associates, there's a lot of misinformation in parent forums and other websites that gets families in trouble. "The lack of clarity leads to confusion which leads to expensive mistakes," said Breedlove. Our goal is to explain the law and help families avoid being blindsided by legal problems."
The IRS has a 20-point test to determine whether a worker is an independent contractor or an employee. "The test is used to gauge who's in control of the employment relationship," explains Breedlove. "Almost without exception, the IRS views the family to be in control."
In those cases, the family is responsible for handling the state and federal employment tax reporting obligations. Although it applies to all types of domestic workers, it is commonly referred to as the "nanny tax."
"The employer taxes are used to fund critical protections and benefits for the worker," said Breedlove. "Social security income, medicare, and unemployment benefits are all funded by these taxes. That's why the IRS and the Department of Labor have recently teamed up to crack down on worker misclassification."