Out There

the nanny tax

Posted in Uncategorized by Pete on March 26, 2012

This will be long and convoluted but its 1:30 and I want to go to bed before my kids wake up at 8, so here goes.  : – )  Did you know that if you have someone babysit in your home, and pay them over $1,800 in the calendar year, you are their employer and you need to give them a w-2, file a w-3 with the Social Security Administration (SSA), and pay the 8.25% of SS, medicare, and fed unemployment taxes?  I didn’t either, until very recently while filling out our 1040.  Here is an email I sent to the SSA on March 19th:

Hi.  My wife and I are teachers and live in remote western Alaska.  In doing my taxes this year, I discovered that for the first time we are subject to the “nanny tax” (IRS schedule H) because we had a “household employee” in 2011.  We had a 19 year old former student babysit for us off and on, in our house.  She did this about 30 times in 2011, usually all day while my wife and I worked (I do short-term, itinerant contract work) and she earned just over $X.  So I just found out that she was technically our employee, and I have to give her a w2 and report the wages to the IRS and SSA (it all started when I got to line 59a on my 1040).  I’m trying to do that.
I did a google search and found some IRS materials which in turn let me know I needed to report the wages to the SSA.  I registered with the SSA Business Services Online and got a username and password.  Then I tried to “add services,” specifically report wages to social security and social security number verification service.  I have a message that “The services listed below are currently pending because your employer’s address cannot be found in SSA records.”  Uh oh.  It says:
If you have not faxed in the required information, please send a fax to (570) 706-7874 and provide the following information:
A letter on your company’s letter head providing the following:
  • A copy of IRS Form SS-4 (or)
  • A copy of IRS Form 941 (or)
  • IRS EIN Notification Letter and a letter on your company letter head including the following:
    • Your Company Name
    • Your Company Address
    • Your Company Telephone Number
    • Your Name
    • Your Social Security Number
    • Your Date of Birth
    • Your User ID (used to log in to BSO)
    • Your Signature
    • Your Printed Name
    • Your Title
    • Authorizing Official’s Name
    • Authorizing Official’s Title
    • Authorizing Official’s Date of Birth
    • Authorizing Official’s Social Security Number
    • Statement certifying that you work for the employer and are authorized to conduct business on behalf of the employer
In my case, there is obviously no company.  Do you want me to send a letter stating that I am authorizing myself to conduct business on behalf of myself?  I’m not entirely joking – if this is what needs to happen please let me know and I’ll do it because I need to file this so I can get my taxes done.  And I’m actually doing the taxes for my babysitter too as a volunteer (I do this for a few different folks in our village every year), so she is waiting on this too because I haven’t gotten her w-2 done yet (I know this was supposed to be done by 1/31 but I didn’t know she was our employee and needed anything from us until March).  The reason the “employer’s address can’t be found in SSA records” is because there are NOT ANY addresses in my village of Kasigluk in SSA records.  No real ones anyway.  We have no streets, no roads, no addresses.  Mail is picked up at the post office, there is no mail delivery.  Proper addresses are name, po box ___, kasigluk, ak 99609 or in some cases replace the 2nd line with “general delivery.”  But when I was filling out the form it said I HAD to put a physical address.  So I put the one that I’ve always put on my taxes even though there is no such thing – 30503 bigpike blvd, kasigluk, ak 99609.
This same issue can be a huge pain for people all over rural AK when dealing with UPS and FedEx in particular.  Not being able to find a “match” for the address in the computer makes people’s heads explode, but I assure you I’m telling the truth.  This has been brought up many times, and here are a couple examples:
If you want to see for yourself, try looking up my village of Kasigluk on google earth.  Find the runway, then go NORTH on the river until you get to another small community, and that would be where I live.  The grey building just to the left of the big blue school, with orange buildings on either side of us.
So I’m sorry this email has gone on so long.  WHAT DO I DO NOW?  I CANNOT FILE THE W2 BECAUSE OF THE BAD ADDRESS.  I CAN’T SEND A LETTER ON COMPANY LETTERHEAD VERIFYING THE ADDRESS BECAUSE THERE IS NO COMPANY AND NO LETTERHEAD.  I can’t send in a paper w-2 because (a) the deadline was the end of Feb and (b) I haven’t figured out how to do it that way anyway (if you want to send me a link that will help me do it that way, thats fine).  I feel very stuck and annoyed at this point.  Hope you can help me out.
Sincerely,
Peter Schneidler
General Delivery
Kasigluk, AK  99609
907-477-2146
ps – ok, here is where I’ll rant.  I guess I’m having trouble understanding why all of this has to be so difficult and confusing.  If a business like amazon.com made it this difficult to buy something they would soon be bankrupt.  I’m very computer and internet savvy, pay most of my bills online, and have always done my own taxes.  But trying to do the right thing and efile a simple w2 for our teenage BABYSITTER was this enormous, labrynthian task.  On my computer I have had the following tabs open for a couple of weeks now:
I at first tried to follow the checklist in the first link above.  It sort of worked until it was time to actually file the w-2 and then I couldn’t figure it out for the life of me.  The third link above has this quote:  “To start creating form(s) W-2/W-3, select the Create/Resume Forms W-2/W-3 Online link under theForms W-2/W-3 Online tab on the EWR Home page to begin working with Forms W-2/W-3 Online application.”  I couldn’t find the EWR home page (naturally not clickable in the quoted text), nor the “form W-2” tab it mentions.  Go to that link and see if YOU can figure it out. What finally opened the door was I stumbled on a “how to” movie clip that I downloaded and shows you how to do it.   It seems like you guys could have a URL like this:
ssa.gov/householdemployees
Or something similar.  It could be the go-to spot for people who need to file 1 or 2 w-2s for things like this.  It could have links to schedule H with the IRS, some FAQ for people like myself who are surprised to learn that they have an employee and that they have certain responsibilities as a consequence, and a list of important dates for us newbies to know when we have to have the various things done.  Seems to me this could happen with about an hour or two of work, mostly cutting and pasting from various existing sources to make a single repository of information.  I recall that the “nanny tax” was famously abused by politicians and other elites in the 80s and it brought down a few political careers.  If so many people are cheating on it, why does the SSA make it so difficult to obey the law and report the wages?

Yeah, that was long.  The best part was the reply I got 15 hours later:

Thank you for contacting the Social Security Administration.

Please fax in the information requested and a representative will contact you within 24-48 hours.

BSO Support

Ha ha.  So, dear reader, what do you think?   Does that mean that yes as I asked above I should fax a letter stating that I am authorizing myself to conduct business on behalf of myself?  I guess I better start working on some snazzy letterhead.

UPDATE – I did place a call to an Anchorage tax preparation place and explained my situation (I unwittingly missed the paper filing deadline and have hit a roadblock with the w2/w3 efile).  The guy knows about village addresses and laughed and suggested that I file by paper anyway and pay whatever the fine is.  He thought it might be like $50 per w2, which of course there is only one.  But the catch (always a catch!) is that the IRS will only accept the pink carbon copy of the w3 form.  I can’t find one online and print it and use it.  He was adamant that if I did that they would trash it without considering it.  Honestly this just cracks me up.  He suggested that I ask around at various businesses and try to find someone who has an extra one of the 5-carbon copy w-3 forms that they don’t need.  HMMMM.  I think I’ll call a tax guy or two in Bethel and see if I can get one mailed to me.  But this annoys me because I’m actually naive enough to think that we should engage and fix the system that is so screwed up so that the proverbial next guy who has this issue doesn’t have to deal with it.  But I’m calculating the odds of me getting through to someone at the SSA who can “fix” it are approximately…zero.  I’m thinking this blog post has a better (not good, but non-zero) chance of effecting change than me sitting on my phone all day, which I guess is partly why I wrote it.

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3 Responses

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  1. Anonymous said, on March 30, 2012 at 11:04 am

    we used to ave many of these problems in Australia too tax wise.The taxation department finally wrote a new form just for those who employ people in their home.Please contact my good friend Kathleen Webb from Nanny payroll services in Virginia.

  2. Ian D. said, on April 6, 2012 at 10:21 am

    Wow. Tax stuff is way too complex. What a mess!

  3. Pete said, on April 13, 2012 at 1:16 am

    4/13/12 UPDATE – OK, I asked at our village store, and half a dozen different places in Bethel but none of them had a w3 I could use. Our school district said I could get one from them, but when I was in Bethel on the appointed day, the guy was out on a family emergency and noone else knew where to find it. I was desperate, when the kind people at http://www.nannytaxprep.com/ offered to email me a blank version. Woohoo! Quyana to them for that. I filled out the forms with a ballpoint pen, then mailed them off to the SSA less than a week ago. Then I was able to do our babysitter’s taxes for her, and then our taxes, which only need to be signed by Tammy and then we’ll mail them off. I put up a huge follow up post to this blog post, dealing with the nanny tax in general and how to deal with it if you find yourself in my shoes.


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