Household employee question

[BooBear]

We are a dual physician family with 3 young children and have been lucky enough to have the same wonderful nanny for over 3 years. With the addition of our third child we transitioned from milage reimbursement to the use of an extra private car for travel to school and a few activities. We try to do everything by the books as far as taxes, workers comp, contract and so forth.

We have gotten to the point where it would be much easier to issue her a credit card for gas for our car and minor expenses than the cash system we currently use. Any advice on special considerations from a financial or a liability perspective? Any insight is greatly appreciated!

[Peds]

can she pay for it and send the reimbursement to you?

[Anesthesia84]

We do a credit card for our nannies. Much easier than cash, which we have done in the past. One thing to know is that when you give them a CC in their name (they are an authorized user on your CC), they can sign into something like credit karma and see how large your balance is as well as your credit limit. I had no idea until our charges sent a notification to our current nanny and she asked if a certain CC was ours, listed in her app. When we get a new nanny we will just open a new CC account with a very low limit.

We also have a third car for "kid use" (whoever is watching the kids that day drives it since it has carseats, etc) and there are no financial benefits to keeping track of mileage, etc according to our CPA. I tried to come up with some way it would benefit us tax-wise but there wasn't anything we found.... Let me know if you do

We did call our insurance company to make sure it wasn't a problem that she was driving our car. She's live out, so no big deal.

Also, not to hijack the thread, but our nanny was wonderful for about 4 years and then started feeling "taken advantage of" despite being paid >20$hr, having the car at work, we paid for a cell phone, she got twice yearly bonuses, etc and we mostly amicably parted ways. I've heard from a lot of people that around 3-5 years things will often go downhill. It seems that is when employees start to let the little things bother them and take the benefits for granted. I hope it doesn't happen for you, but we really thought we found a Mary Poppins and would keep her forever (until the kids were in high school) and it was a shock that things were not as they seemed. HOWEVER, the reason I want to share- we found excellent new nannies within a week and our lives are so much better not worrying about if Nanny #1 was worried about this or that, annoyed about something, trying to tiptoe around her demands. Ugh. So don't be afraid to move on if needed! We were totally afraid to, and thought we could never find someone new! Turns out we were so so so wrong.

[jfoxcpacfp]

• Technically, as her employer, any personal use or gas you pay for should be included on her W2.


• Otherwise, if she is just using your car in the course of working for you, there is nothing to do, tax-wise.


• If she is using her own car (which would be my recommendation), an accountable system would work best. She would keep a log of miles driven for you and you would reimburse her at any rate you choose. Most employers (except government) use the government-allowed rate (ironic, I know), which is currently 53.5 cents per mile. If you pay her more, then she claims the difference as income. If you reimburse her less than that, she gets an employee business expense deduction on Schedule A, subject to the 2% haircut and being able to itemize.

As your CPA correctly stated, there is no tax benefit for you.

[BooBear]

Thank you so much for the tips about the credit card. This was exactly the sort of thing that I wanted to take into consideration.  We have good friends who's nanny of 3 years was suddenly not so wonderful over the course of a few months and I was not aware that 3-5 years can sometimes be a turning point. Things are working well for all parties right now, but I really appreciate the heads up! I hope we get another few quality years out of the arrangement at least, but it is always good to be prepared.

[BooBear]

jfoxcpacfp - Thanks for the input! We can no longer use option 3 as the addition of a third child under 4 resulted in an inability to fit all 3 kids in carseats in our nanny's small car. The car we have designated for work is only used for work purposes. These restrictions are both practiced and stated in writing in our contract. If it is our car and we are paying for the gas to drive our children directly, I was under the impression that this did not need to be reported in her w2 if the car was exclusively used for transporting the children while at work. Is this correct?

Thanks!

[jfoxcpacfp]

BooBear wrote:

f it is our car and we are paying for the gas to drive our children directly, I was under the impression that this did not need to be reported in her w2 if the car was exclusively used for transporting the children while at work. Is this correct?

Click to expand...

Yes, that is correct. It is only personal use that would need to be reported. Of course, reporting the occasional drive to the grocery would really be splitting hairs. otoh, if you gave her a car for her exclusive use, then she would need to keep records for reporting purposes.