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In-Home Childcare Employment Issues

Unemployment Taxes
If you pay wages of $1,000 or more in a calendar quarter of 2005, you also are required to pay federal employment tax (FUTA), which is generally .8% of the wages paid until wages exceed $7,000. After that, there is no liability for federal unemployment tax, although you may be required to pay state unemployment tax.

State Taxes
In addition to federal withholding and FICA liability, you may have to withhold or report state income tax on the nanny's wages as well. Also, states may require employers to pay for workers' compensation insurance. States' laws vary in these areas, so be sure to get competent tax advice when hiring a nanny.

Employment Eligibility Verification
Once you hire a nanny and become an employer, both you and the nanny are required to complete a United States Citizenship and Immigration Service (USCIS—formerly the Immigration and Naturalization Service (INS)) Form I-9, also known as the Employment Eligibility Verification.

You are not required to file the completed form with the federal government. Keep it for your records, because the law does mandate that you have it available for inspection by the proper federal authorities if necessary. You must keep the I-9 for the longer of three years after you hire your nanny or one year after the employment relationship ends.

For you to complete your portion of the I-9, you are required to review certain documents proving that your nanny is legally eligible to work in the United States. She needs to provide you with documentation that shows (1) her identity and (2) employment eligibility. Some documents are adequate to show both, but some only show one or the other. For example, a United States passport will serve as proof of both identity and eligibility. A driver's license, however will show only identity, and the nanny also will have to give you proof of eligibility, such as a Social Security card. A complete listing of appropriate documents is included with the Form I-9. A copy can be obtained online at www.uscis.gov.

Minimum Wage and Laws
As an employer, you have to abide by other state and federal labor laws. The federal Fair Labor Standards Act (FLSA) governs minimum wage and overtime pay for covered employees. Although casual babysitting arrangements are not subject to the FLSA, a domestic workers, such as fulltime nannies, must be paid minimum wage. Overtime pay in the amount of one and a half times the employee's regular wage must be paid for hours worked in excess of forty per week. (However, this part of the law does not apply to live-in nannies.)

Where the state minimum wage law differs from the federal law, the higher of the two is the wage you must pay. Most of the states that have their own minimum wage laws mandate the same amount as the federal government. A handful of states require a higher minimum wage.

NOTE: Workers who are under the age of 20 have a lower minimum wage for the first 90 consecutive calendar days of employment or until the worker turns age 20, whichever comes first. After that, the minimum wage goes up to the regular amount.

More on: Childcare

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Copyright © 2005 by Linda H. Connell. Excerpted from The Childcare Answer Book with permission of its publisher, Sourcebooks, Inc.

To order this book visit Amazon.com.


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