Save Your Career Opportunity by Paying Nanny Taxes

Save Your Career Opportunity by Paying Nanny Taxes

By A New England Nanny 21 0

paying nanny taxesIt seems like the career opportunity of a lifetime. The incoming president’s transition team is considering you for a position in his cabinet or a senior-level appointment in a government agency or even an ambassadorship.

Or…it’s the chance you’ve waiting for your entire career. You’re being considered for partner in your firm or a C-level position in a major corporation.

In either scenario, you’ve worked hard. You’ve sacrificed. Your professional resume is impeccable. You’ve cleared the background checks. You’re cruising through the vetting process.

Then come the questions that make your palms sweat, create a lump in your throat and knock you off stride:

“Have you ever hired a nanny, in-home caregiver, housekeeper or any other individual to work in your home? If so, did you pay the proper taxes?”

For jobs that require a government security clearance, you will be required to fill out SF-86 (Questionnaire for National Security Positions). That form asks, “In the past seven (7) years have you failed to pay Federal, state, or other taxes when required by law or ordinance?”

As it turns out, you hired a nanny to look after your young children as you and your spouse both work. You pay the caregiver under the table because it’s easier, and who has time to manage payroll and taxes? The nanny doesn’t mind. There’s more money is her paycheck. Plus, how was anyone going to find out?

This situation likely plays out more often than you think, considering just an estimated 10 percent of household employers pay their workers legally.

From “Nannygate” to Today

Robert Rizzi, a partner and chair of the tax group at Steptoe & Johnson LLP, guides political appointees through the vetting process. He recently told Bloomberg BNA that he has had clients under consideration for nomination by the Obama administration who were immediately disqualified for failure to pay their nanny taxes.

Going back a few years, Zoë Baird was the first high-profile individual to fall victim to this mistake. She was President Clinton’s first choice for Attorney General. However, Baird withdrew her nomination when it came to light that she and her husband had hired illegal immigrants to serve as chauffeur and nanny. They also failed to pay the proper employment taxes on the workers.

The controversy became known as “Nannygate” and led to changes in the way household employers report their taxes. Congress reacted by passing a law that raised the minimum annual pay that triggers tax payments and gave birth to Schedule H. This form, which reports household employment taxes, is filed with a domestic employer’s personal tax return.

Now nanny taxes is one of the “heavily scrutinized” issues that nominees can expect to confront during the vetting process.

The past eight years has seen an increased scrutiny of tax returns, according to Rizzi. He calls it a “hot-button tax issue” for nominees. Problems with Timothy Geithner arose during his vetting process for the Treasury secretary position under President Obama. He hadn’t paid Social Security and Medicare taxes on his domestic workers for several years. Geithner subsequently paid his back taxes and filed amended returns. He was confirmed shortly after President Obama took office. Former Sen. Tom Daschle wasn’t so fortunate. He was forced to withdraw his nomination for Health and Human Services secretary because of several tax problems, including failure to pay income taxes on his driver.

How to Save Your Career Opportunity

What can you do if you’ve been paying your domestic worker off the books?

First, take care of your back tax obligations as soon as possible. Now is a great time to deal with this especially if you just hired a household employee in the past year. Our affiliate GTM Payroll Services offers back tax work at reasonable rates. They can help you correct issues and become compliant moving forward.

Or maybe you’re unsure if you’re doing it right and would rather not find out at an inopportune time. Call GTM at (800) 929-9213 for a free, no-obligation consultation and they’ll review your specific situation and help you determine your compliance and next steps.

Your career opportunity deserves it.

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