Why Now Is the Time to Get Your Household Employees On the Books, Even If They Can’t Work At the Moment.

With the recent passage of the Families First Coronavirus Response Act (FFCRA), it couldn’t be more timely to pay your nanny (or other domestic worker) on the books, and report your 2019 nanny taxes ASAP as it benefits both you and your nanny. Here’s why:

  1. Under FFCRA, you can obtain quick support to pay your nanny or any household employee for up to 2 weeks of paid sick leave and up to 12 weeks of paid sick leave and expanded family and medical leave. See More about FFCRA below for the qualifying reasons under FFCRA and additional information.

  2. You’ll be able to capture a payroll tax offset provided under FFCRA almost immediately and provide invaluable support to your employee. Domestic workers are typically low wage earners who are particularly vulnerable to a missed paycheck.

  3. Your employee could be eligible for health insurance. Under the current crisis, several state health insurance exchanges have reopened enrollment. With verifiable income, uninsured employees may qualify for subsidized coverage.

  4. Paying on the books doesn’t add as much cost as you might think. Payroll taxes add about 10% to your payroll cost, but there are several ways in which the tax liabilities can be minimized, and sometimes eliminated altogether. One big way is through a Dependent Care Flexible Spending Account (FSA) if your employer offers this benefit, and COVID-19 has triggered an off-cycle enrollment period for FSAs which may enable you to enroll if you previously hadn’t. Definitely sign-up for this if you can!

  5. You’re at risk regardless of how you’ve paid. Your nanny can file for unemployment benefits without your knowledge, which would immediately bring attention to unpaid payroll taxes and potentially lead to fines, penalties, etc. Further, regardless of employment status, domestic employees are protected from wage theft and can easily initiate a wage theft claim.

  6. Catching up on your 2019 household employment taxes doesn’t cost that much. In our experience, it adds about 6% to your payroll tax bill, a small amount in relation to the benefits provided.

  7. Paying on the books provides benefits above and beyond the present. Your employee receives unemployment benefits, Social Security, Medicare, verifiable income for an apartment lease or car loan, and other income based social benefits. You receive peace of mind and satisfaction in doing the right thing.

Here’s what one of our customers who needed to catch up on their 2019 nanny taxes recently had to say about us (we’re a solid 5-stars on the App Store--read more of our reviews here):

5 star review Nest Payroll Catch-up on nanny tax.png

More about FFCRA:

FFCRA requires most household employers to provide their employees with paid sick leave and expanded family and medical leave for qualifying reasons related to COVID-19 beginning April 1, 2020 through December 31, 2020. FFCRA provides employers with 100% reimbursement of their paid leave requirements in the form of immediate payroll tax credits, or an accelerated payment from the IRS if the credits are less than the covered wages.

Under FFCRA, an employee qualifies to receive benefits if the employee cannot work because they:

  1. Are subject to a Federal, State, or local quarantine or isolation order related to COVID-19

  2. Have been advised by a health care provider to self-quarantine related to COVID-19

  3. Are experiencing COVID-19 symptoms and is seeking a medical diagnosis

  4. Are caring for an individual subject to an order described in (1) or self-quarantine as described in (2)

  5. Are caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19

  6. Are experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury

FFCRA provides employees with up to two weeks (80 hours, or a part-time employee’s two-week equivalent) of paid sick leave based on the higher of their regular rate of pay, or the applicable state or Federal minimum wage, paid at:

  • 100% for qualifying reasons #1-3 above, up to $511 daily and $5,110 total

  • 2/3 for qualifying reasons #4 and #6 above, up to $200 daily and $2,000 total

Also, FFCA provides up to 12 weeks of paid sick leave and expanded family and medical leave paid at 2/3 for qualifying reason #5 above, up to $200 daily and $12,000 total.

More information about employer requirements under FFCA can be found in our FFCRA Employer Guide.

DISCLAIMER: The material provided herein is for informational purposes only, and should not be construed as legal or tax advice on any matter.