Politics & Policy

The Nanny Tax

You shouldn’t have to be an accountant and a lawyer to hire a nanny.

There are certain laws everybody breaks. Everybody jaywalks, nobody respects the speed limit, and nobody pays taxes for the children’s nanny. But would more parents follow nanny-related laws if the system were more straightforward? As a new mother, I wonder.

I had spent several years as a full-time speechwriter. Last spring, I became a full-time mother and part-time writer. I scribbled freelance pieces in the snippets of time I could snatch; and there weren’t many.

In the fall, my husband and I decided to hire part-time help, liberating me to write more regularly. That decision was fairly easy. Finding someone we liked and trusted to watch our baby was harder. But the most head-breaking of all has been the legal and accounting nonsense associated with our new position.

Yes, our new position. In becoming parents, it seems that my husband and I unwittingly also became a small business. And in becoming a small business, we found that all the immigration and taxation rules that affect employers now apply to us.

Is there any field where it’s more square to insist on hiring legal workers than nannying? If so, I haven’t heard of it. Chalk it up to my German-Jewish (a.k.a. rule-following) roots, my husband’s being a lawyer, or our desire to be good examples for our daughter, but we never considered hiring someone who wasn’t legal. In fact, that has been one of our primary litmus tests, eliminating many candidates other families would have gladly hired. Having spoken both with parents I know and with candidates’ references, I say this with some confidence.

My experiences are obviously anecdotal, but my sample size, which includes approximately 30 interviewees and numerous other candidates who flunked our initial written screening questions, is large enough to merit comment. We have met only one other family that made a high priority of hiring a legal nanny; the husband worked in the office of his state’s attorney general.

I regularly ask references whether they can corroborate a candidate’s legal status and whether they withheld taxes. Every reference has confirmed that the candidate in question was legal. However, among the many references, only one has ever said yes, she had withheld. Another was planning to do it going forward, but only because she had now hired the woman so many times.

Explicitly asking applicants whether they are U.S. citizens, green-card holders, or otherwise authorized to work is easy — and crucial — although I’ve discovered that simply asking whether someone is “willing and able to work legally” doesn’t always translate. And some candidates don’t understand what withholding will mean for their paychecks, so that can require explanation. However, from a parent’s point of view, the worst part, hands down, is the labor required to follow state and federal tax and employment laws.

Knowing what and how much to withhold requires significant research. In the Washington area, where three separate jurisdictions meet (Virginia, Maryland, and D.C.), that can be especially complicated if you hire a nanny who lives in a jurisdiction different from yours. Add onto that requirements you never dreamed existed for a part-time position, including paying unemployment benefits and workers’ compensation, and issuing a W-2 form.

I’m lucky my husband is a Harvard-trained lawyer, but even he wasted hours wading through inscrutable legalese on numerous websites and calling several government offices for guidance. Why isn’t all of this information centrally organized, with the steps required to comply with the law clearly delineated? It’s as if the government is daring parents — even those who’d like to be law-abiding — to violate the law.

To be sure, there are families who hire illegal nannies because they are personally comfortable with the individuals, and those who are happy to pay lower wages and no taxes. But no doubt more would comply with the nanny laws if they only knew what they were and how to do so.

In the current climate, all levels of government have an incentive to be more proactive. Rather than raise taxes, governments should collect those that are already owed. That may be plenty: Laura Weiland, president of the Nanny Tax Company, which helps parents pay both federal and state taxes, estimates that only 2 percent of parents pay the nanny taxes they owe. In the current climate of fiscal austerity, that number should make Treasury officials perk up.

If the IRS and its state-level equivalents want American parents to obey employment law, they should tell us how in plain English. States and the federal government should provide an online list of the steps required to be legally compliant small-business employers, including links to relevant documents.

It’s unfair to expect parents to be both legal and accounting experts. Our core business is parenting the next generation, and that should be enough.

— Melissa Langsam Braunstein served as a speechwriter at four federal agencies during the George W. Bush administration, including the Department of State. She now works at home, raising her daughter and writing, primarily about motherhood. Her recent writing can be found at www.melissabraunstein.com.

 

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