Hiring a Domestic Worker
So, you’ve decided to hire a Nanny because your are tired of dragging your kids out of bed at 6am to get them to the daycare center and make it to work on time. These days nannies are a much more popular and common option for younger parents. Whatever your reasoning, once you hire a Nanny you are now an employer and there are many important things to know about your new role.
First: According to Care.com: “The IRS defines a household employer as someone who pays an individual to perform duties in or around their home and has the right to control when, where, how or by whom the work should be performed”. The IRS considers the worker you have hired to be your employee not a contractor. Filing a 1099 form will not be sufficient. Worker misclassification is considered Tax Fraud in every single state. As an employer you must now:
- Withhold payroll taxes in accordance with the employee w4 selections
- Pay the employers part of the Social Security and Medicare as dictated by the state
- File State and Federal Employment Tax Forms with the Massachusetts Department of Revenue (DOR) and the Department of Unemployment Assistance (DUA). You can use an employee tax calculator and employer tax costs and savings calculator to assist you in accurate documentation and payout amounts
- Prepare a W2 at the end of the year
Second: If the Nanny will be driving the family to get the kids to and from their daily activities and appointments you will not have coverage under your auto insurance policy in the event of an accident. You must add them to your policy as a primary driver. You can allow them to use their vehicle as an option. Make sure they have adequate coverage that provides for “business use” of their car.
Third: Will the Nanny be living at your home? If the answer is yes, make sure they get Renters Insurance. This will cover the loss of their personal belongings in the event that you have a fire at your home which destroys everything.
Fourth: Purchase a Workers’ Compensation policy that will cover workplace injuries incurred by your employee in the course of performing their duties. This includes medical expenses and lost wages while they are unable to work and protects your family from a lawsuit initiated by your employee for the same injuries.
Fifth: Consider a separate Employment Practices Liability Policy to cover such unforeseeable lawsuits initiated by an employee such as discrimination, wrongful termination and even harassment.
Lastly: you are not required to provide Health insurance. You can direct the employee to an online health insurance exchange to purchase their own policy, however, there are some tax incentives if you do.