Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Care for Caregivers despite High-Profile Cases, Many Workers Aren't Paid Legally

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Care for Caregivers despite High-Profile Cases, Many Workers Aren't Paid Legally

Article excerpt

The rules related to paying taxes for nannies and other household help can be complicated, which is part of the reason a high percentage of nannies and other household workers are not paid legally. Some estimates put the percentage of families who employ household help yet cheat on the nanny tax as high as 80 to 95 percent.

"It really depends on the area," said Barbara Kline, president of White House Nannies in Bethesda, Md.

"If there is ever an area where people take the nanny tax seriously, it's the Washington, D.C., area. Most of my clients are lawyers. People in this town have seen others get into serious trouble over this and they don't want that happening to them."

The issue of paying taxes for household workers made big news in 1993 when President Bill Clinton nominated two women -- Zoe Baird and Kimba Wood -- for U.S. attorney general and both ended up pulling their names out of consideration when investigators found they had failed to pay taxes for their household employees.

Caroline Kennedy withdrew her name in 2009 as a candidate for New York's vacant U.S. Senate seat for similar reasons, and outgoing Treasury Secretary Timothy Geithner's nomination also was threatened for tax-related mistakes he made, which also included an issue related to a housekeeper.

In general, families who paid a household worker -- nannies, housekeepers or gardeners -- more than $1,800 in wages in 2012 are responsible for withholding taxes for those employees.

Stephanie Breedlove, a payroll tax expert for the household worker industry, has built a company that helps about 10,000 families nationwide set up payroll systems and stay in compliance with the nanny tax law.

The idea for her business came shortly after she hired a nanny. She could not figure out how to pay the worker legally and she did not personally know of anyone who was following the rules. She launched her business about six months before the "Nannygate" scandal involving Ms. Baird and Ms. Wood.

"When the scandal broke, it was very helpful in bringing more awareness to what we do," said Ms. Breedlove, a partner at Breedlove and Associates in Austin, Texas. "It was the first time media attention became focused on this large group of workers who were not being paid legally,"

She estimates between 5 million and 10 million people work in the household care industry.

Ms. Breedlove said families who pay the nanny tax are eligible for child care tax credits of between $2,000 and $2,500 depending on their tax rate. Families also are likely to have a stronger and longer relationship with household workers when they are paid legally, and the family doesn't have to lose sleep worrying about potential back taxes or penalties that come with tax evasion charges, she said.

But caregivers are by far the biggest winners and the biggest losers when it comes to the nanny tax. …

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