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Nannies and Taxes!!!

EMLDFEMLDF member
in Working Moms
So this is a controversial topic and people seem to have strong opinions on both sides.  My questions are... if we pay legally, I can use a dependent FSA ($5000 limit) but then we also pay taxes so is it pretty much a wash?  Also, what are the benefits to the nanny?  I'm thinking we may need to sell her on this .... 
My natural inclination is to pay legally as I generally like following the law!  It just seems to be lose lose to all parties involved (except the government)... I'm confused and need to figure this out quick!!
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Re: Nannies and Taxes!!!

  • financialdivafinancialdiva member
    edited August 2013
    Yea you can use your FSA if you pay her legally. If you are trying to compare figures be sure you take into account the penalties and interest you will owe if either one of you are audited and paid her under the table ;)
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  • jlaOKjlaOK member
    I think the benefit of not having to fear being audited by the federal government should be benefit enough for the nanny.
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  • EMLDFEMLDF member
    Yes, I tend to agree that not being audited / following the law is a benefit enough.  This is her first "real" nanny position and I think she just assumed she'd be paid under the table just like she has for occasional Saturday nights, etc.  
    When we hired her, we all thought it was going to be temporary so we didn't bother to discuss it.  Now we are in the process of organizing a nanny share.  Our other option is a home daycare which is a much simpler set up in terms of schedules/ permanence and payment.   But we love our nanny and the more individualized care.
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  • leah2bleah2b member
    It drives me nuts when people pay "off the books".  It is illegal and it cheats your employee of future social security wages.  I particularly can't stand it when people call themselves "liberals", yet they cheat the social safety net system of their own most trusted employees.  Just my 2 cents!
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  • nosoup4unosoup4u member
    Followng the law is optional? Now you tell me!

    We pay taxes on our nanny.
    DS1 - Feb 2008

    DS2 - Oct 2010 (my VBAC baby!)

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