Ethical/logistical dilemma

[KrazyKow]

<p>ski - some counties in PA do charge an “EMS tax” that is up to $50/year out of your paycheck that you can’t get back in any way. Doesn’t matter if you’re not a PA resident, if you’re employed in a county that charges it, you pay it. I wasn’t particularly excited to have $50 deducted from what I thought should be a $100 paycheck at my first job, but I’m just glad I wasn’t counting on that money.</p>

[wisteria]

<p>

Every kid who babysat should report that income and pay taxes on it. And every parent did so when they were younger, right?

</p>

<p>Um, no. If earnings from babysitting and other odd jobs (mowing, etc.) total less than $400 per year, there is no requirement to file or pay taxes on it.</p>

<p>

All you selfrighteous folks who hire a local person to mow, clean, babysit etc. are tracking payments to see if you need to withhold income tax, pay employment tax and so forth, right? You’ve hired a household accountant to keep track, right?

</p>

<p>I’m not self-righteous, but I filed and paid employer taxes when I hired part-time student babysitters back in the mid-80s. The process was more cumbersome then than it is now (because the IRS has streamlined the procedure and also because TurboTax and TaxCut software can now handle many of the details for you now), but I didn’t need an accountant then. I just called the IRS and state revenue agencies and asked them to mail me the relevant instructions and forms. They were pretty straightforward. </p>

<p>My babysitters thought my insistence on paying them “on the books” was weird, but since I offered to pay both halves of FICA (employee share and employer share), they had nothing to lose.</p>

<p>In fact, reporting and paying their FICA taxes meant that if–heaven forbid–they had been disabled in an auto accident a few years later, they would have been more likely to qualify for Social Security disability payments because they would have had more “covered quarters” of FICA. (This consideration is also relevant to zoosermom’s daughter, by the way.)</p>

<p>The current rule for household employees (babysitters, etc.) is that if you pay $1,500 per year to a babysitter, you are required to file and pay the Federal “nanny taxes” on her. As I said, there is now a simplified and streamlined procedure for doing this right on your own 1040.</p>

<p>Of course, for a business employer like an ice-cream shop, the $1,500 minimum does not apply. The business is required to remit FICA of 15.3% on all employee compensation, no matter how small.</p>

<p>But the law does provide exceptions for casual household employees paid less than $1,500 per year, and they provide exceptions for “self-employment income” of less than $400.</p>

<p>

Just remember, this is a friend the OP is dealing with. What is the price of that friendship? Does the OP really want to risk bringing heat on someone who no doubt was well intentioned?

</p>

<p>I agree that this is a sensitive topic to bring up, but I think it can be done in a diplomatic and respectful way, just as I did with my babysitters.</p>

<p>I pointed out that it was in everybody’s interest to do things the correct way. (And this can be even more true nowadays, especially if your babysitter or household employee qualifies for the Earned Income Tax Credit, which is essentially a “negative income tax” that subsidizes the wages of low-income workers with dependent children.)</p>

<p>EDIT: As for household workers who mow or clean, if they provide their own equipment and you do not micromanage them and if they work for a number of different clients, they are considered self-employed, in which case filing and paying taxes is their responsibility and not yours. Babysitters are generally considered self-employed only if you bring your child to their house. If the babysitter watches your kid in your house, they are a household employee and you are considered an employer.</p>

[wisteria]

<p>Back to the OP, here is some helpful information from the IRS FAQ page at <a href=“http://www.irs.gov/faqs/faq-kw133.html:[/url]”>http://www.irs.gov/faqs/faq-kw133.html:&lt;/a&gt;&lt;/p&gt;

<p>

1.16 IRS Procedures: W–4 - Allowances, Excess FICA, Students, Withholding</p>

<p>What can be done if an employer will not withhold income taxes, social security, and Medicare from my pay?</p>

<p>Generally, in situations such as this, the employer is not considering you to be an employee. Rather, you are being treated as an independent contractor (self-employed person). If you cannot resolve this matter with your employer, and if you feel that an employer-employee relationship exists, you should submit a Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The factors used to determine if an employer-employee relationship exists are covered in Chapter 2 of Publication 15-A (PDF), Employer’s Supplemental Tax Guide. </p>

<p>If your status as an employee is not at issue, it may be that you are in a category of employment whose earnings are not defined as wages under U.S. federal tax and social security law. Find out from your employer the reason that social security and Medicare taxes and income taxes are not being withheld from your pay. If you have further questions, contact the IRS at 800-829-1040 or visit an IRS walk-in office for assistance.

</p>

<p>Note that the IRS suggest that the first line of approach should be to talk to your employer and reach a mutual understanding. Also note that the approach described above is very non-judgmental and non-accusatory–it’s simply a matter of “You and your employer need to get the facts sorted out correctly and, if necessary, we are willing to help sort them out.”</p>

<p>Form SS-8 mentioned above is here:</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/fss8.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/fss8.pdf&lt;/a&gt;&lt;/p&gt;

<p>Looking through SS-8 gives you some idea as to the factors the IRS considers to decide whether a given person is an employee or self-employed.</p>

[newmassdad]

<p>wisteria,</p>

<p>And you pay use taxes, too? How much last year?</p>

[emeraldkity4]

<p>I couldn’t even keep track of all the taxes
sales tax
property tax
monorail tax
income tax
"sin " tax
liscense tabs
tax on hotel rooms
so we pay our taxes but I have to shut my eyes for the total</p>

[latetoschool]

<p>This just came out two days ago from Senator Levin’s committee - it’s way far afield of the ice cream shop employer, but absolutely fascinating reading - more entertaining than Harry Potter: </p>

<p><a href=“http://hsgac.senate.gov/_files/TaxHvnAbRPT.pdf[/url]”>http://hsgac.senate.gov/_files/TaxHvnAbRPT.pdf&lt;/a&gt;&lt;/p&gt;