{"id":340,"date":"2024-12-31T08:00:00","date_gmt":"2024-12-31T08:00:00","guid":{"rendered":"https:\/\/s37407.p1377.sites.pressdns.com\/homepay\/the-4-most-common-ways-families-get-caught-paying-a-caregiver-under-the-table\/"},"modified":"2025-02-03T23:02:22","modified_gmt":"2025-02-03T23:02:22","slug":"the-4-most-common-ways-families-get-caught-paying-a-caregiver-under-the-table","status":"publish","type":"post","link":"https:\/\/www.care.com\/hp\/the-4-most-common-ways-families-get-caught-paying-a-caregiver-under-the-table\/","title":{"rendered":"The 4 most common ways families get caught paying caregivers under the table"},"content":{"rendered":"\n<div class=\"wp-block-careblocks-table-of-contents\"><h2>In this article<\/h2><ul><li><a href=\"#bd53d45f\">Scenario #1: Your caregiver files for unemployment benefits<\/a><\/li><li><a href=\"#5bda8d07\">Scenario #2: Your caregiver files a wage dispute with the Department of Labor or the state<\/a><\/li><li><a href=\"#237af362\">Scenario #3: The IRS randomly audits your tax return<\/a><\/li><li><a href=\"#73660dce\">Scenario #4: Your caregiver files their taxes using a replacement W-2 form<\/a><\/li><\/ul><\/div>\n\n\n\n<p><span><span><span>When you hire a household employee, such as a nanny, senior caregiver or personal assistant, you have a specific set of <\/span><a href=\"https:\/\/www.care.com\/hp\/nanny-tax-guide\"><span><span>tax and payroll&nbsp;responsibilities<\/span><\/span><\/a><span> to follow. Yet some families choose not to abide by these requirements. What they don\u2019t realize is that it\u2019s relatively easy to be caught paying a caregiver under the table \u2014 and the consequences can be damaging. <\/span><\/span><\/span><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><a href=\"https:\/\/www.care.com\/homepay\"><img decoding=\"async\" width=\"300\" height=\"250\" src=\"https:\/\/www.care.com\/hp\/wp-content\/uploads\/sites\/3\/2024\/08\/300x250-V2-1.png\" alt=\"Cross nanny taxes off your to-do list forever\" class=\"wp-image-3084\" style=\"width:-155px;height:-58px\" \/><\/a><\/figure><\/div>\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><span><span><span>\u201cThere are actually several very common scenarios where the IRS or a tax agency in your state can be made aware of your failure to pay household employment taxes,\u201d says Tom Breedlove, Sr. Director of <\/span><a href=\"https:\/\/www.care.com\/homepay\"><span><span>Care.com HomePay<\/span><\/span><\/a><span><span>.<\/span> \u201cAnd given that several public figures over the past couple of years have had political nominations derailed by household employment issues, you could argue that this topic is in the spotlight more than ever.\u201d<\/span><\/span><\/span><\/p>\n\n\n\n<p><span><span><span>If you do get caught, you\u2019ll have to file late tax returns to state tax agencies and amend your personal income tax return \u2014 which can be a months-long process. You\u2019ll also have to pay the back taxes you owe, along with any penalties and interest added by the state and the IRS, which can be several thousand dollars. <\/span><\/span><\/span><\/p>\n\n\n\n<p><span><span><span>So before you decide whether to pay your caregiver legally or risk paying off the books, consider these four common situations.<\/span><\/span><\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-scenario-1-your-caregiver-files-for-unemployment-benefits\" data-toc-id=\"bd53d45f\"><span><span><strong>Scenario #1: Your caregiver files for unemployment benefits<\/strong><\/span><\/span><\/h2>\n\n\n\n<p><span><span><span>Most people are familiar with the process of filing for unemployment benefits if they\u2019re let go from their job. However, there a far fewer who understand what happens after the initial claim is filed. If you have to let your caregiver go and they file for unemployment benefits, the state will investigate your caregiver\u2019s claim. Part of that investigation is pulling up your record as an employer, which is identified through a unique tax identification number on record \u2014 assuming you have one.<\/span><\/span><\/span><\/p>\n\n\n\n<p><span><span><span>If you\u2019re paying your caregiver under the table, the state won\u2019t have record of you as a registered employer, meaning they\u2019ll know right away that you haven\u2019t been paying <a href=\"https:\/\/www.care.com\/hp\/unemployment-insurance\">unemployment insurance taxes<\/a>. This will most likely trigger an audit of your tax returns to confirm how much in state unemployment insurance taxes you\u2019ve failed to send in. The IRS will also likely get involved as your tax payments to the state include a small portion that is supposed to fund the federal unemployment insurance tax pool. Until these issues are resolved, your caregiver will also be ineligible to receive unemployment benefits because you haven\u2019t contributed to the benefits pool.<\/span><\/span><\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-scenario-2-your-caregiver-files-a-wage-dispute-with-the-department-of-labor-or-the-state\" data-toc-id=\"5bda8d07\"><span><span><strong>Scenario #2: Your caregiver files a wage dispute with the Department of Labor or the state<\/strong><\/span><\/span><\/h2>\n\n\n\n<p><span><span><span>If your caregiver feels they have been paid incorrectly, they may turn to the state or the Department of Labor for help. Disputes over pay can originate from several different issues, including:<\/span><\/span><\/span><\/p>\n\n\n\n<ul>\n<li><p dir=\"ltr\"><span><span><span>Discrepancies over the hours your caregiver works.<\/span><\/span><\/span><\/p><\/li>\n\n\n\n<li><p dir=\"ltr\"><span><span><span>Failing to pay overtime if your caregiver worked more than 40 hours in a week.<\/span><\/span><\/span><\/p><\/li>\n\n\n\n<li><p dir=\"ltr\"><span><span><span>Not paying for agreed upon sick time or vacation days.<\/span><\/span><\/span><\/p><\/li>\n\n\n\n<li><p dir=\"ltr\"><span><span><span>Being <a href=\"https:\/\/www.care.com\/hp\/1099-vs-employee-why-the-difference-matters-when-you-hire-a-caregiver\">misclassified as an independent contractor<\/a> instead of an employee.<\/span><\/span><\/span><\/p><\/li>\n<\/ul>\n\n\n\n<p><span><span><span>\u201cWhether your caregiver\u2019s assessment of their pay is accurate or inaccurate is irrelevant as an investigation will be opened once the dispute is filed,\u201d says Breedlove. \u201cAnd workers can file a wage dispute even a couple of years after they stopped working for you.\u201d<\/span><\/span><\/span><\/p>\n\n\n\n<p><span><span><span>When a case worker begins going over the merits of your caregiver\u2019s complaint, they will want to see documentation to back up the claims being made. With no record of you as an employer, it will be apparent that taxes have not been part of the employment arrangement, especially if there are also no pay stubs to prove otherwise.<\/span><\/span><\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-scenario-3-the-irs-randomly-audits-your-tax-return\" data-toc-id=\"237af362\"><span><span><strong>Scenario #3: The IRS randomly audits your tax return<\/strong><\/span><\/span><\/h2>\n\n\n\n<p><span><span><span>According to the IRS, <\/span><a href=\"https:\/\/www.irs.gov\/statistics\/compliance-presence\" target=\"_blank\" rel=\"noreferrer noopener\"><span><span>nearly 583,000 tax returns were audited<\/span><\/span><\/a><span> for the 2023&nbsp;fiscal year (Oct. 2022 &#8211; Sept. 2023), which resulted in $31.9 billion in recommended ad\u00additional tax. That may not seem like a very high number compared to the number of families who file tax returns, but if you\u2019re one of the people randomly selected for an audit, you don\u2019t want the IRS finding out you employed a caregiver in your home but did not withhold taxes from them or pay taxes as a household employer. <\/span><\/span><\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-scenario-4-your-caregiver-files-their-taxes-using-a-replacement-w-2-form\" data-toc-id=\"73660dce\"><span><span><strong>Scenario #4: Your caregiver files their taxes using a replacement W-2 form<\/strong><\/span><\/span><\/h2>\n\n\n\n<p><span><span><span>Household employees are supposed to receive a W-2 so they can file their personal income tax return. If you pay your caregiver under the table, there is no tax form for them to use to file their taxes. Even if your caregiver is not knowledgeable about how taxes work, they are most likely aware that something needs to be sent to the IRS every year to be compliant with the law. <\/span><\/span><\/span><\/p>\n\n\n\n<p><span><span><span>The IRS has a substitute form for a W-2 called <\/span><a href=\"https:\/\/www.irs.gov\/forms-pubs\/about-form-4852\" target=\"_blank\" rel=\"noreferrer noopener\"><span><span>Form 4852<\/span><\/span><\/a><span> that your caregiver can use to send in the taxes they owe if you have failed to provide them with a W-2. The form specifically asks them for information about their employer (in this case, you), which greatly increases the chance that the IRS will be in contact with you regarding the way you\u2019ve set up employment with your caregiver. <\/span><\/span><\/span><\/p>\n\n\n\n<p><span><span><span>These four scenarios we\u2019ve outlined can happen to just about any family. The risk associated with paying a caregiver under the table simply isn\u2019t worth it when you think about the financial and legal consequences. And this doesn\u2019t take into account missing out on the <\/span><a href=\"https:\/\/www.care.com\/hp\/nanny-tax-breaks-and-deductions\"><span><span>tax breaks<\/span><\/span><\/a><span> that come with paying legally \u2014 or the <\/span><a href=\"https:\/\/www.care.com\/hp\/4-reasons-why-nannies-and-senior-caregivers-need-to-be-paid-legally\"><span><span>benefits your caregiver receives<\/span><\/span><\/a><span> when paid on the books. <\/span><\/span><\/span><\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><span><span><strong>Next steps:<\/strong><\/span><\/span><\/p>\n\n\n\n<ul>\n<li><span><span><a href=\"https:\/\/www.care.com\/hp\/7-steps-for-creating-a-nanny-payroll-account\"><span><span>Learn how to set up payroll properly for your <\/span><\/span>caregiver<\/a><\/span><\/span>.<\/li>\n\n\n\n<li><p dir=\"ltr\"><span><span><a href=\"https:\/\/www.care.com\/homepay\/nanny-tax-calculator\"><span><span>Use a budgeting calculator to run payroll scenarios that include tax breaks<\/span><\/span><\/a><\/span>. <\/span><\/p><\/li>\n\n\n\n<li><a href=\"https:\/\/www.care.com\/hp\/1099-vs-employee-why-the-difference-matters-when-you-hire-a-caregiver\"><span><span><span><span>Read more about why your caregiver is most likely your employee<\/span><\/span><\/span><\/span><\/a>.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn about the most common ways families get caught paying their caregiver off the books and why you shouldn&#8217;t risk it.<\/p>\n","protected":false},"author":1478,"featured_media":341,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"enable_toc":true,"care_post_updated_flag":false,"care_updated_date":"2024-12-31 08:00:00","last_update":"2024-12-31","view_count":43361,"footnotes":""},"categories":[1],"tags":[],"member-type":[2],"vertical":[3,366],"platform":[11],"acf":[],"created":"2019-04-26","_links":{"self":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts\/340"}],"collection":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/users\/1478"}],"replies":[{"embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/comments?post=340"}],"version-history":[{"count":10,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts\/340\/revisions"}],"predecessor-version":[{"id":3443,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/posts\/340\/revisions\/3443"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/media\/341"}],"wp:attachment":[{"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/media?parent=340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/categories?post=340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/tags?post=340"},{"taxonomy":"member-type","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/member-type?post=340"},{"taxonomy":"vertical","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/vertical?post=340"},{"taxonomy":"platform","embeddable":true,"href":"https:\/\/www.care.com\/hp\/wp-json\/wp\/v2\/platform?post=340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}