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NannyCast 22: Employee (mis) Classification

Transcript:

Hello, and welcome to another exciting episode of NannyCast! I’m Nanny Jen. And this episode is unfortunately only useful to nannies based in the United States of America. We are going to talk about being a misclassified employee.

[Nanny T]

Thank you for that anonymous question Nanny T. The short answer is simply that something is illegal when it is against the law.

[Homework Solutions]

That audio you just heard came from Homework Solutions, a leader in nanny payroll and taxes and the payroll processor that I personally recommend to all of my employers when they are willing to pay for something automated. The law is absolutely crystal clear that a nanny is an employee. Spelled out. By name.

Of course, that requires you to know what a nanny is, and for that, here is Mark J Kohler of C&E CPAs.

[Mark quote]

So in summary, if you work in the home of your employer, and earn at least $2000 a year, you are a nanny. And not only a nanny, you are a household employee.

Are there any childcare workers who work in the home of their employer and earn over $2000 a year who are not nannies? Yes, says Mr. Kohler.

[Mark quote]

If you work in your own home and have your charges brought to you? Nope, not a nanny.

We often debate and deliberate what a nanny is on the nanny support groups and while we like to add all sorts of extras about professional development and social and emotional well being, the truth is that in the United States of America, a nanny is different from a babysitter just by earned income alone: $2000 or more in a calendar year.

So that covers what a nanny is and that, by law, a nanny is a household employee. Unambiguously. Because the law says so. Using the word nanny. No question.

So then does a nanny, an employee, match with a 1099? Not so. A nanny deserves a W2. And more than that, there are three forms to be aware of.

Audio on these topics are aimed at employers rather than employees, but here is Mr. Kohler explaining all of the forms.

[Mark quote]

The W4 leads to a W2 at year’s end. The W9 leads to a 1099 at year’s end. And the I9? That leads to you having a job. Just remember, if your W form at hiring has a 9 at the end, that’s bad. W9 and 1099 both end in 9 and they are related. W2 and W4 are both divisible by 2. Even numbers are your friend. As for I forms. I don’t care about it.

So now that we have thoroughly thrashed the proverbial horse of a nanny being an employee and necessitating a W2 a year’s end, just out of curiosity, let’s find out what this 1099 Independent Contractor stuff is. Here are both Homework Solutions and Mr. Kohler on the topic. Both have slightly different answers because the IRS is a wee bit vague, but the similarities ought to be striking and why a nanny doesn’t qualify is crystal clear.

[Homework Solutions]

[Mark]

So to summarize, a nanny isn’t an independent contractor because they cannot control their schedule, the cannot work for other clients, they are the same person who shows up to work every day or week rather than morphing into someone else, cannot tell their employer that they’ve gone over budget on their income and so the employer has to give them a raise just so, and they cannot single handedly decide to outsource parts of their job without an employer promptly firing them for cause.

[S]

That’s a good question, because we’ve been implying but not stating that **this is federal**. This means that it is illegal to drop an independent contractor designation on a nanny no matter which of the fifty United States a nanny is working in.

So S, go tell your nanny sister that she is being done wrong by her employers! Next!

[Nanny S]

Evens are your friend. That W9 is not even. You want to fill out a W4 so you can get a W2.

You ought to also fill out an I9. Remember Iiiiiiiiiiii don’t worry about that form.

[Nanny T]

That beautiful question leads us to the next portion of our podcast. What **do** we do when we are handed a 1099 instead of the W2 we are supposed to be given?

[Tax Insights]

The form they are referring to is form SS-8. Remember how evens are our friend? It cannot be filed anonymously, but filling that out allows you to file your taxes as if you had been given a W2 instead of a 1099. As there are minor tweaks to tax forms every year and this podcast episode is meant to be evergreen, there will be a link to a link to this form in the podcast show notes.

If you think form SS-8 should be an automatic file every time an employer hands you a 1099, you really need to hear this next question.

[Nanny R]

Remember back to the beginning of the show when we defined a nanny. There was an income requirement. And, Nanny R, for that year by earning just over $600, you simply didn’t meet it. For that year and for that family, you weren’t a nanny. You were something else entirely undefined. Which means, that you need to ask a tax professional as other complicating factors can range anywhere from you reporting that income in the line for “Other Earned Income” all the way to you having to pay your taxes as an independent contractor for that year. This is why we love and fairly compensate our tax professionals.

And we are out of questions that were submitted by the nanny community. If you want to submit questions for any podcast topic, go over to nannycast dot com and click on Share with Us for a computerized voice as we have done here, or if you are brave enough to use your real voice, click on Submit a Soundbite.

But wait, there’s more! As a treat for sticking through to the end, we’ll let the folks from Hawkins Ash CPAs tell us about what horrors await an employer when we nannies refuse to be party to tax fraud and do file that SS-8 form!

[Tax Insights]

Thank you for listening to this podcast and please visit nannycast dot com for the show notes. All of the audio you have heard here came from longer, much more informative pieces and we’ve linked to all of them. Until next time, this has been Nanny Jen wishing you proper employee classification.

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