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Taxes on Nanny/childcare

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  • #16




    Thanks for replies.

    I see the truth in this I just still don’t quite get it from the standpoint of the IRS. They seem to be saying that a household worker is not allowed to be an independent contractor. Do we think that this is just b/c basically none of them would file? I haven’t been asking to see their tax returns obviously but also anecdotally it seems that most of the people we are interviewing are not filing any taxes and haven’t in years. I wonder what would happen to them the first time they do actually file? Couldn’t that trigger an audit that could just absolutely devastate them? Seems like IRS would get back statements and flag everything coming into their bank account as income? Maybe they all just lead cash lives though.

    Yeah we are definitely passing on someone we really liked b/c she was non-negotiable on getting paid cash. From polls of our friends paying cash actually seems to be the most common thing in Chicago. Unclear if they are taking a carefully calculated risk or just don’t know any better. I guess if you just took out a bunch of cash every month and paid them that way (as opposed to with checks) the IRS could never prove that you had a nanny?

    Lots of interesting stuff here for sure.
    Click to expand...


    No, they would not.  Hate to break it to you :lol: but people generally don't pay taxes on cash.  Yeah, it's illegal.

    When you tip your hairdresser, waiter, cab driver, pizza delivery guy, that's just cash in their pocket.  When you give your lawn guy a few twenty dollar bills, that just goes in his pocket.  You think they report that on their 1040EZ?  ************************ no.

    Many people actually literally believe you don't have to pay taxes on cash, like that's the law.  Remember, we're not always dealing with the most sophisticated folks here.  But most of them simply don't want to pay tax, and they know they can get away with it.

    Fact is, unless the IRS is getting some form of reporting (1099, W2, etc), they have no clue.  And until you start filing returns, you're completely off their radar.  The IRS doesn't get a copy of your bank statements unless they go out of their way to request them.  And even if someone was making cash deposits, it would be up to the IRS to prove these were taxable wages and not gifts from Aunt Gertrude.  And then, we're talking about squeezing a turnip here, very unprofitable way for an auditor to spend his or her time.

    It's the same reason that employers are forced to withhold for you, and report your income to the IRS.  If they didn't, tons of employees would simply forget to pay their taxes, or, by the time the tax bill hits, wouldn't have any money left to pay it.

    Yeah, you're taking a risk paying someone cash.  The easiest way they could prove it is if the cash employee ever tattled on you.  In theory they don't want to report that they've been dodging taxes themselves, but when all their friends are getting their refund checks, they wonder why you haven't been paying their taxes for them.

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    • #17
      That's my understand on all points.

      I have no interest in trying to get out of paying this legally, mostly just curious as to the underpinnings.

      It is odd to me that the liability seems all to fall on the employer side of the ledger esp in what is basically just a transaction between 2 people.

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      • #18




        That’s my understand on all points.

        I have no interest in trying to get out of paying this legally, mostly just curious as to the underpinnings.

        It is odd to me that the liability seems all to fall on the employer side of the ledger esp in what is basically just a transaction between 2 people.
        Click to expand...


        The reason the liability falls on the employer side is because the employer is typically the only one with the ability to pay.  Squeezing a turnip, and all of that.

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        • #19
          It is not that a nanny or other person providing services to a homeowner can not be an independent contractor. They most certainly can if they are truly independent with multiple clients, E.g. housecleaning services.

          For example, your landscaper, someone who plows your driveway, paints your house or any number of trades and businesses who have multiple clients, provide their own tools, etc... all of what makes them a business. Even the day care center providing similar services to a nanny is a business.

          However, a nanny who only provides these services for you, comes to your house, using all of your resources, is most definitely an employee. This is no different than a homeowner with large property needs and hires someone; who only does the landscaping, snow removal, painting  and other maintenance for your property with your resources. That person is most definitely a household employee.

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