Advantages To Hiring Legally

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% to your cost. On a $30,000 annual salary, that’s roughly an additional $1,200, 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!