The Nanny Tax

In January 1993, Clinton’s nomination of corporate lawyer Zoë Baird for the position of attorney general came under attack after it became known that she and her husband had broken the law by employing two illegal aliens from Peru as a nanny and chauffeur for their young child. They had also failed to pay Social Securitytaxes for the workers until shortly before the disclosures. While the Clinton administration thought the matter was relatively unimportant, the news elicited a firestorm of public opinion, most of it against Baird. Within eight days, her nomination lost political support in the U.S. Congress and was withdrawn. (Nannygate)

Do you have a Nannygate problem?  Employing undocumented workers is not the critical issue here, it is the non payment of employment taxes for services provided in your home by an employee.

From IRS Publication 926:  It is unlawful for you to knowingly  hire or continue to employ a person who cannot legally work in the United States.  You must complete a Form I-9  on each person that regularly works for you.

If you will pay cash wages of $1800 or more to any one household employee, then you need to withhold and pay social security and medicare taxes and give that employee a Form W-2.  State and federal unemployment taxes may be due, also.

Household Employer’s Checklist

You may need to do the following things when you have a household employee.
When you hire a household employee: □ Find out if the person can legally work in the United States.
□ Find out if you need to pay state taxes.
When you pay your household employee: □ Withhold social security and Medicare taxes.
□ Withhold federal income tax.
□ Decide how you will make tax payments.
□ Keep records.
By January 31, 2013: □ Get an employer identification number (EIN).
□ Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement.
By February 28, 2013 (April 1, 2013, if you file Form W-2 electronically): □ Send Copy A of Form W-2 to the Social Security Administration (SSA).
By April 15, 2013: □ File Schedule H (Form 1040), Household Employment Taxes, with your 2012 federal income tax return (Form 1040, 1040NR, 1040-SS, or Form 1041).
If you do not have to file a return, file Schedule H by itself.

 

Form 944 – Am I Eligible?

To file Form 944, Employer’s Annual Federal Tax Return,  you must be notified by the IRS that you are eligible to file Form 944.    If you estimate that your annual payroll tax liability for 2012 will be $1,000 or less and would like to file Form 944 instead of quarterly Forms 941, now is the time to contact the IRS to request to file Form 944.

To File Form 944 for calendar year 2012, you must call the IRS at 1-800-829-4933 by April 2, 2012, or send a written request postmarked by March 15, 2012.  The IRS will send you a written notice that your filing requirement has been changed to Form 944.  If you do not receive this notice, you must file quarterly Forms 941 for calendar year 2012.

 New employers are also eligible to file Form 944 if they will meet the eligibility requirements. New employers filing Form SS-4, Application for Employer Identification Number, must complete line 13 of Form SS-4 indicating the highest number of employees expected in the next 12 months and must check the box on line 14 to indicate whether they expect to have $1,000 or less in employment tax liability for the calendar year and would like to file Form 944.

Generally, if you pay $4,000 or less in wages subject to social security and Medicare taxes and federal income tax withholding, you are likely to pay $1,000 or less in employment taxes. New employers are advised of their employment tax filing requirement when they are issued their EIN.

Written requests to file Form 944 should be sent to: Department of Treasury, Internal Revenue Service, Ogden, UT 84201-0038 or Department of Treasury, Internal Revenue Service, Cincinnati, OH 45999-0038.