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In addition to avoiding all the consequences of
breaking the law, there are a number of advantages for you, your bottom
line, and your
nanny to hiring and paying someone legally.
For you, these may
include:
- Dependent Care Account: Save taxes
by putting up to $5,000 pre-tax per family per year into a
Dependent Care Account if applicable and offered through your
employer. Depending on your effective tax rate, this
could save you hundreds or even thousands of dollars in federal
and state income, social security and medicare taxes while
you use this pre-tax money on eligible dependent care
expenses including – you
guessed it –
paying your nanny.
- Child and Dependent Care Tax Credit:
You may be eligible to claim the federal Child and
Dependent Care Tax Credit. This credit, if applicable,
allows you to receive a minimum tax credit of 20% for the first
$3,000 in qualifying expenses for each of your first two children
per year.
- Cash Flow: You can actually improve
your cash flow by paying your nanny legally. By withholding
your nanny's personal income and employment taxes, your weekly out
of pocket cost to pay your nanny legally is often lower than what
you would have paid under the table. Thus, although you
ultimately will pay these withholdings to the state and federal
governments, especially if you pay your household employment taxes
annually, you can reap the time value of this money and improve
your weekly cash flow.
And Most Importantly
- Peace of Mind: You get to spend more
time with your family and sleep well at night knowing that you've
done everything legally. Don't underestimate how worrying
about getting caught and the consequences of
hiring illegally can take a toll on you personally and
professionally. Contact Legally Nanny® today to stop worrying
and get on with enjoying your family.
Your
bottom line: After calculating potential tax advantages,
hiring a nanny legally typically adds approximately 4-5% to your
cost. On a $20,000 annual salary, that’s roughly an additional
$800-$1,000, a small price to pay for the personal and professional
peace of mind that comes along with hiring your nanny legally.
Remember, paying employment taxes isn’t an option, it’s the
law.
For
your nanny, the advantages of working legally
include:
- Access to unemployment and disability insurance, workers
compensation, medicare and social security benefits.
- Building an employment history and establishing
credit.
- Potentially qualifying for the federal Earned Income
Credit which could result in your nanny receiving a tax
credit larger than the amount she paid in taxes, all by
working legally!
Above all, paying your nanny legally demonstrates respect for
her and the important job she's doing caring for your
children. Thus, in addition to the many advantages for both you
and your nanny outlined above, employing your nanny legally allows
both of you to feel good about your employment relationship for the
benefit of your family.
Contact Legally
Nanny® today for all the legal and tax
advantages applicable to your particular situation and see how
we can save you money by hiring and paying your
nanny legally. We look forward to hearing from
you!
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