OT: Nanny tax

iforgot

Hi, I was a member here a while ago but cant remember my log in information. I remember some of you were nannies and wondered if you could help me out with this situation. In 2013 I was working sporadically for a family watching their daughter in their home. Random hours, usually 4-10 hours a week. They had a nanny with regular PT hours also. We never discussed taxes. They asked me at the beginning of the summer (2014) to work for them as their part time nanny as the girl they currently had found another job. I worked 12-20 hours a week until December. Again, we didn't discuss taxes until October when it randomly came up as she wrote my check. Fast forward to now and they are trying to give me a 1099. It is my understanding that as a nanny you are a household employer and not an independent contractor. I sent them information on this when they mentioned the 1099. They have an accountant who told them to use 1099. They said they would talk to him again with the info I gave them and see what he said. I haven't heard back. What can I do if they don't give me a w-2? I can not afford the tax/fees that would come from the 1099 and legally I shouldn't have to. I just don't know what I could do about it. This family is so nice and I am supposed to work for them again this summer. I hate confrontations!

K&H

They likely will not give you a w-2. It's a lot of extra work to get that set up and get an employer number. Was this your only income? How much are we talking? Unfortunately uoure likely going to get slammed because it's been set up this way. It's something to talk with them about for sure.
I'll think more and come back if I think of other options.

Shanny

It doesn't sound like they were taking taxes out of your pay?

iforgot

Yes this was my only income other than school loans and it was not a lot of money- between $5,000 and $6,000. No they were not taking taxes out of my pay which is why I thought it was an under the table situation like it had been the year before. I've worked as a nanny for two other families before- first being under the table and the second was on the books through a payroll service. I had no idea that a 1099 was even an option. I thought they either gave me a w-4 in the beginning and I got a w-2 at tax time or it was under the table. Everything I've read says that a nanny is a household employee, not an independent contractor and that the IRS considers paying a nanny as an independent contractor as a form of tax evasion.

horton

Yeah, legally you're not an independent contractor, but obviously legally you need to claim your income to the irs regardless. You SHOULD get a w-2, but regardless of which way you do this, you'll have to pay taxes from your income. If they haven't withheld any, you'd still have to pay. Not knowing anything about your family size/circumstances, I don't know if you'd end up truly owing the federal government with amounts that small (I can't speak for your state or city income taxes, though), but I think that's pretty much the only way you wouldn't have to pay here. If you do proceed with the independent contractor thing, be aware that you will be required to pay estimated tax payments quarterly next year (2015) to make up for the fact that nothing is withheld from your paycheck. If I were you, I'd consult my own tax professional on this one. There no way this is going to be super pleasant, no matter how it goes. Sorry.

iforgot

It actually would have benefited me from the beginning to pay taxes and claim the income. I'm a single mother with 1 child so I could have gotten tax credits for the income I earned. The reason I didn't push for that from the start was because they had mentioned looking into a payroll service for a past nanny but it all seemed so pricy. I really needed the job so I took it even though not paying taxes isn't the right thing to do. I'm probably somehow cashing in those bad karma points now from the look of it.

K&H

If you are single with one child you could file head of household. If your income was less than $13,000 you don't need to file at all. And school loans are not income.
You could get the 1099 and see what happens if you file using it, and then decide if it would be worth it to file at all. Turbo tax website would walk you through the whole thing and it doesn't cost money to see what your tax return would be. (In fact I think there's a free version you can use).

Shanny

Agree with everything K&H said especially contacting your own tax professional. Good luck. In the future, sign a contract!!

blkbrd3

The above tax information isn't entirely accurate. If you have self-employment income of $400 or more you have a federal filing requirement. Self-employment tax is a little under 14% of every dollar of profit. One can have a self-employment tax liability without having a federal income tax liability.

I would review your particular situation with a tax professional. The fact that they want to issue a 1099-MISC when they're not required to makes me nervous for you.

Shanny is right. Contracts are important.

K&H

If you do have to file you can deduct any money you spent on your child's health insurance.. hopefully it will equal out and not slam you.