JustAnswer
>
Tax
Ask A Question
|
Register
|
Login
|
Help
Tax
Ask a Tax Question, Get an Answer ASAP!
Have your own Tax question?
5 Tax Professionals are Online Now
characters left:
Not a Tax Question?
Related Tax Topics:
Car
,
Gov
,
Irs
,
Law
,
Pay
,
Tax
,
Plan
,
Paid
,
Rate
,
Work
Question
We are hiring a new nanny. This one is a much more experienced nanny who will be paid a higher salary. She will be using her own car and I know that if she keeps track of mileage of car during work hours we can reimburse non-taxable at the current rate (about $.55 per mile right now I think). What other non-taxable benefits can we provide to her to give her more benefits without incurring more taxes above her salary? - stipend for a cell phone? - any other car usage amount like a % of her car payment? - can all of her auto insurance be paid by us and be non-taxable? - I know that health insurance is one that we can do - what documentation would we need if it is provided as a stipend? - any other things that I am missing as possibilities? - when we provide $ based on her mileage - what documentation do we need to keep? - we know an approximation of mileage that she will need to use for all of the kids activities - is that mapquest estimate good enough or does she need to keep a log?
Submitted: 25 days and 18 hours ago.
Category: Tax
Value: $15
Status: CLOSED
+
Read More
Optional Information
State/Country relating to question: North Carolina
Posted by
TaxMomNJ
25 days and 18 hours ago.
Answer
Tmschade,
Technically, since she is providing a service to you, anything you pay for her is taxable to her. You may pay bills for her but she must include them in income and then deduct them, which will not truly reduce her tax burden. What you can do to reduce her tax liability is to treat her as a Household Employee. See publication here: http://www.irs.gov/publications/p926/ar02.html#en_US_publink100086722
What happens with a "self-employed individual" is they are subject to pay the employer AND employee's portion of the social security and medicare taxes. That is equal to 15.3% of her net income. If you treat her as a household employee, you can pay 7.65% of these taxes and withhold 7.65% from her
OR
you can elect to pay the full 15.3% yourself. This will reduce her tax burden.
Please let me know if I can assist you further.
25 days and 9 hours ago.
Reply
Sorry - I may not have been clear - she is a household employee and we pay all taxes as appropriate. I was speaking off benefits aside from her salary knowing that some are non-taxable such as offering health insurance.
Accepted Answer
Tmschade,
What you might do to provide nontaxable benefits is: calculate what percentage her car and cell phone are used for services to your family and what percentage are personal use. If you ONLY pay the portion of her car insurance and cell phone that is used for service to your family, this will not be a taxable benefit to her.
Other considerations for nontaxable benefits are a retirement plan and education expenses (providing the education is bettering herself to take care of your children).
There are several ways to keep records of the expenses you paid- bank account statements, receipts, cancelled checks. As far as the mileage goes, she should have a log that shows the date, how many miles were driven, and the purpose of the drive (school to soccer practice, school to grocery store). Keeping a log for mileage is a good idea, especially for IRS purposes so it is documented that everything was done in accordance with tax law.
Please let me know if I can help you further.
Expert:
TaxMomNJ
Pos. Feedback:
100.0 %
Accepts:
Answered:
10/27/2009
Tax Advisor
5 years experience with tax preparation company, over 200 hours of tax courses taken
+
Read More
Related Tax Questions
I have lost money that is not retrievable in a Ponzi scheme.
How do I determine the purchase price of a stock I bought I-...
5 yrs after my husband's death, the trustee of the estate ha...
What happens when 2 people claim the same dependent. I don't
How long does it take to recive an overpayment back?
If I've made 88,000 last year and I've contributed $5000 to
My mother in law sold her house in June 2008, according to
How do accountants handle infinite life depreciation?