Facebook Twitter

CONGRESS HAS FINALLY REFORMED TAX LAWS FOR HOUSEHOLD HELP

SHARE CONGRESS HAS FINALLY REFORMED TAX LAWS FOR HOUSEHOLD HELP

The latest labor savings associated with domestic employees has nothing to do with taking care of kids or scrubbing floors. We're talking about real dirty work here: complying with the tax laws.

Congress has finally reformed the "nanny tax," which until now required quarterly payments of Social Security and Medicare taxes for household employees who earned more than $50 in a calendar quarter.Under the new rules, quarterly payments are abolished. Starting in 1995, you'll pay Social Security and Medicare taxes just once a year, as part of your personal income-tax return (which you file in 1996).

Federal unemployment taxes, will also be paid with your Form 1040.

In addition, Congress raised the wage threshold that triggers the tax. Retroactive to the beginning of 1994, you owe only if you pay household help more than $1,000 a year.

If you were hit by the $50-per-quarter rule but escape under the $1,000-a-year-rule, don't make the fourth quarterly payment for 1994 due Jan. 31. You'll get a refund on the taxes you've already paid.

One final point that will bring a sigh of relief to teens who baby-sit or mow lawns and the adults who hire them: The new law exempts students under age 18.