Is My Nanny an Employee or Independent Contractor?

Many household employers ask “Is my nanny an employee or independent contractor?” Misclassifying your worker is considered tax evasion and can lead to costly fines and penalties. Over the years, the Department of Labor and IRS have increased their enforcement. So it’s important to understand the distinction. Let’s look at the differences.

Transcript

Is your nanny or other domestic worker considered an employee or an independent contractor?

Misclassifying your worker is considered tax evasion and can lead to costly fines and penalties. Over the years, the Department of Labor and IRS have increased their enforcement.

So it’s important to understand the distinction.

Let’s look at the differences…

An employee is a person who takes instruction from their employer, has a schedule set by their employer and uses tools and equipment provided by their employer.

Independent contractors, on the other hand, work under their own conditions, set their own schedules, and use their own supplies.

Nearly all of the time, the IRS classifies a nanny as an employee.

Why?

The family informs the nanny how they want their child to be looked after and tells the nanny the days and times she needs to be working. The nanny uses the family’s kitchen and utensils to prepare meals, and their stroller for walks, and so on.

The family is defining the work that needs to be done, setting the schedule, and controlling how the work is done. They are an employer and the person filling their job is an employee.

This means families need to withhold and remit employee taxes as well as pay their own employer taxes.

The employee should get Form W-4 at the start of employment to determine how much to withhold for federal income taxes. And Form W-2 at year end.

Families also need to comply with all tax, wage, and labor laws that impact household employment such as minimum wage laws, overtime regulations, and a Domestic Workers Bill of Rights.

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