Some might remember the case of Zoe Baird, President Bill Clinton’s initial choice for attorney general, whose 1993 nomination was withdrawn after it was revealed that she and her husband employed two undocumented immigrants as nanny and part-time driver and paid them under the table. Or more recently, the nanny and tax problems that were said to have derailed Caroline Kennedy’s bid for Hillary Clinton’s old Senate seat.
A 2009 investigation by The Washington Post revealed more than a dozen officials whose career hopes were complicated or thwarted by tax and other problems involving household employees. And according to individuals involved in the current process, the presidential transitions’ standards for compliance have become more strict, not less, in the past eight years.
Fears of another “Nannygate” scandal might be part of the reason Washington-area residents are more likely to pay household employee taxes than other Americans. (“No fewer than three-quarters of all household employers are currently failing to pay their nanny taxes,” a 2010 study concluded, looking at the whole country.)
But lawyers involved in vetting for high-level government positions say they regularly encounter candidates and other senior D.C. professionals surprised by the federal and state tax requirements that come with household employees.
For some, their warnings come too late. But for those starting to hire caretakers for children, here are two common areas of confusion.
- First, according to the IRS, if you paid cash wages of $2,000 or more to a single household employee in 2016, you owe employment taxes.
- Second, it is easy to mistakenly assume your nanny (or other household worker) is an independent contractor, especially if you “share” the nanny with another family. This is not the case if “you can control not only what work is done, but how it is done,” according to the IRS. If the worker is following your specific instructions in doing their job, it is very likely they count as your employee for tax purposes.
Worker advocates urge families to comply with these rules, despite the perceived low risk of tax penalties. (Remember, household workers paid under the table fail to build enough recorded earnings to qualify for Social Security and other benefits as they age.) But if altruism doesn’t motivate you, let ambition do so.
After all, in this town, you never know what your next job offer might be.