Hiring household help used to be easy. “When my mother needed help, we hired a nurse for $5 an hour to help her in her home,” a family member reported to me. Now, finding help for home care looks different, both in how much it costs and the possible helpers. Many family members have told me that the hardest part about hiring household help is the unpredictability of getting a caregiver who stayed, was affordable, trustworthy and bonded well with their loved ones. This complex issue comes up again and again in my work with families facing elder care.
But, recently, I have been seeing people who have helped with home care for many years needing their own help. Many of these people have worked for years as caregivers for older adults and nannies for children. Now, due to age, the economy or other medical issues, these folks are not employed and need assistance to apply for appropriate benefits. Many were paid in cash, with no taxes paid on their behalf; consequently, they have no official work history to apply for benefits.
Most benefits such as unemployment, Social Security and disability are based on your past work credits. The way that you establish work credits or a history is based directly on taxes paid on your income, which is often paid for you by your employer. If a worker is let go and applies for unemployment and names the employer, the state and IRS may investigate non-payment of taxes.
This issue has been coined the “nanny tax” and has been hounding potential political figures for years. Most recently, Treasury Secretary Timothy Geithner had some problems during his nomination process regarding an issue with a housekeeper and why Caroline Kennedy might have pulled out of the New York Senate seat. This topic can definitely be thorny. But I think that the other side of the coin is more compelling. What safety net can a person depend on if the taxes are not paid? Yes, it is true that in the short-term, people who get paid on a cash basis may have a higher salary. Yet when they are older, become disabled or are let go, what then? Many folks who I have spoken with, who hire people without paying taxes, are not doing this just because they don’t care. Often, it stems from the worker wanting the highest salary and the employer wanting to keep a good worker. Another reason is the incredibly complicated system to pay an individual’s taxes. The IRS Publication 926, “Household Employer’s Tax Guide,” explains in detail how to pay the taxes and has each state’s contact information for employment rules.
So, what to do? Streamlining the process by which employers pay their household help’s taxes would be a start. The easier the process, the more likely it will followed. Be informed about the possible outcomes of your decision as an employer or as an employee when no taxes are being paid. Many of the people who I have worked with now wish that they had thought about what “cash only” would mean for their financial future.
Betsy Zuber, geriatric specialist, has been working in the field of aging for 18 years. She provides social services to Island residents ages 55+ and their families. Contact her at (206) 275-7752, betsy.zuber@mercergov.org, or mail MIYFS 2040 84th Ave. S.E., Mercer Island, WA 98040. Mercer Island Youth & Family Services is a department of the city of Mercer Island.
