Legislation updating Social Security's "nanny tax" on household help is headed to President Clinton for his signature.
The Senate gave unanimous approval Thursday to the bill approved earlier in the day by the House.Effective with the 1994 tax year, household employers would have to pay Social Security and Medicare taxes on any worker earning at least $1,000 a year, up from the current threshold of $50 a quarter. Teenage baby sitters would be exempt.
The problems with the tax were brought to light when it was revealed that Clinton's first choice for attorney general, Zoe Baird, had not paid Social Security taxes for her child-care worker.
Several other candidates for top positions in the administration were embarrassed by similar revelations.
"A lot of hard-working and normally law-abiding taxpayers woke up to the realization that they were tax cheats and lawbreakers," said Rep. Jim Bunning, R-Ky.
By raising the threshold and requiring employers to file taxes once a year, instead of quarterly, lawmakers believe more people will pay taxes on their employees, allowing them to qualify for benefits from Social Security when they retire or become disabled.
The bill allows employers to file both Social Security and unemployment taxes annually, and on their own 1040 federal tax returns.
Under the bill, the $1,000 threshold would rise with future growth in wages, with increases occurring in $100 increments.