The Importance of Paying Your Caregiver on the Books

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Even if you’re not a political candidate running for office, paying your domestic help on the books is the law—and the right thing to do.

Though there are countless individuals who avoid paying payroll taxes on the services nannies, babysitters, housekeepers and eldercare helpers provide, they risk penalties far larger than the effort and cost it would take to comply.

If a former employee files an unemployment or worker’s compensation claim against you, it could trigger a government audit and the penalties could be steep, says Stephen Fuchs, an attorney with Littler Mendelson. You would owe all the back taxes, penalties and interest—and you’d have to pay an attorney, too.

“An employer can be fined $1000 for every 10 days of compensation plus criminal penalties” just for not complying with the workers’ compensation rules, says Fuchs.

A much cheaper option is to pay your domestic help on the books. There are a variety of payroll taxes and fees such as Federal Insurance Contributions Act (FICA) that goes to Social Security (SS) and Medicare, and worker’s compensation. This will amount to at least 10 percent of the payroll depending on the state, says Eli Lehrer, the director of finance, insurance and real estate at The Heartland Institute, a public policy think tank. To be sure, you will pay more than you would if you paid your help under the table.

To read more of this article featured on the Workman’s Compensation Compliance Reporting in the USA blog and to learn how to pay your nanny on the books, click here.

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