Financial Facts About Caregivers Who Work in Your Home (continued)

What If Two or More Parents Share a Caregiver? Each family must report and pay Social Security (and any other applicable taxes) individually on just the wages it pays the worker. (BANANAS has a Handout, Parent-Created Child Care – Shares, available for $3 at our office or by mail – which goes into more detail.)

What Will It Really Cost to Hire an In-home Caregiver?

As an employer you would pay the following taxes on your caregiver’s wages:

If you pay your caregiver $10 per hour, you would pay an additional $1.67 in taxes (16.76% of $10) for a total cost of $11.67 per hour. If you choose to pay your caregiver’s share of Social Security/Medicare taxes, which some families do, you would add an additional 76.5¢ (7.65% of $10) and not withhold this money from the employee’s check. The same applies if you elect to pay the State Disability Insurance, which would add another 0.6% in 2007.

Do I Have to Pay My Caregiver Minimum Wage? Federal and California minimum wage laws apply to caregivers employed on a regular basis who either earn $50 or more in a calendar quarter or work more than eight hours in any workweek. So the teenage babysitter who sits for you now and then is probably not covered by California’s minimum wage of $8.00 per hour (as of 1/1/08). However, you may have to pay more if you want to keep a caregiver for any length of time!

Tax Compliance Services – A number of services do payroll and/or recordkeeping for families using in-home caregivers (e.g. babysitters or nannies). Some of these services have websites with calculators to figure out how much taxes to pay; others sell do-it-yourself software; still others will do the whole process for you, including writing a check to the provider and preparing your tax reports. Type “nanny taxes” in your search engine and you’ll find services, such as paycycle.com, 4nannytaxes.com and breedlove-online.com. Paychex and ADP also provide payroll and tax payment services for in-home caregivers. Visit the www.parents.berkeley.edu website for feedback from parents using some of these businesses.

Summary – Parents who use the same in-home caregiver daily or frequently should investigate their reporting responsibilities. Given the complexity of the reporting rules and the additional cost, many – if not most – parents who should pay taxes don’t. But problems can arise when a caregiver applies for Social Security benefits, or if s/he is injured while working in your home.

BANANAS Child Care Information & Referral • 5232 Claremont Ave., Oakland, CA 94618 • 658-7353 • www.bananasinc.org

© 1989, BANANAS,Inc. Oakland, CA. Revised 2007.