Currently, about 5% of all households that have household workers such as nannies are reporting payments for wages to the Internal Revenue Service. Some households have paid workers “under the table” or provided a 1099 tax form that identifies workers as “independent contractors.” Most have done this as a way to keep expenses down and reduce paperwork.
The Wall Street Journal reported on this issue on March 8, 2013. It described how the IRS has offered an amnesty program to families that reclassify nannies and other household workers. This allows families to avoid paying a penalty or interest for wages that have gone unreported. This program is designed to collect tax revenue due to the Internal Revenue Service but also to assist families in becoming current with tax requirements. Another part of the issue is that people that ignore this amnesty program may be more likely to be audited in the future.
Anyone that has been paying nannies or other household workers such as cooks, maids, gardeners or others in cash or has been giving the employees a 1099 contractor’s form at the end of the year will want to take advantage of this amnesty program. The cutoff date is June 30, 2013.
Please review the Internal Revenue Service webpage about the program for more details.