Many household employers mistakenly assume that because the employment of domestic work is within their own home, they are unlikely to get caught paying their employee illegally. Because there is a long history of household employment being paid in this way, many employers assume that this is the accepted way of paying for work in the home. Even if they are aware of the consequences, many believe getting caught is so unlikely to happen that the risk is worth it. This is not the case. Paying your nanny off the books may mean an employer is investigated by the IRS. Some of the circumstances where this might occur include:
- If you have formerly paid payroll taxes on past household employees but then do not with a new employee.
- You use an agency or an online registry and the IRS audits that entity for information about household employers not reporting payroll taxes.
- You terminate an employee who has not been paid legally and they complain to the IRS.
- You have mistakenly assumed the employee is an independent contractor and not an employee, so have not withheld the correct tax obligations.
- A former employee files for unemployment benefit but cannot get it because you have not paid unemployment tax.
- An employee is injured on the job so tries to claim worker’s compensation and has to name you as the employer.
- A retired employee wants to claim social security and reports working for you.
Ignorance is no excuse for breaking the law. As an employer, it is critical for you to understand the laws and regulations governing household employment, payroll taxes, hiring, and so on. By using a household payroll service like GTM Payroll, you’ll spend less time worrying about complying with laws and spend more time with your family. Contact us for more information, or simply get started today with a FREE household payroll quote from GTM!