Here is a blog from on the best practices of nanny health insurance.

Q. What does the family need to do regarding documentation to keep the health insurance non-taxable?

A. A family needs to have evidence that the nanny actually HAS health insurance in place, and that the policy cost is equal to or greater than the stipend. The easiest way to do this is for the family to write the check for the stipend directly to the insurance carrier. If that is not possible or desired, the family needs to:

1. Obtain and retain a certificate of coverage that shows the period and amount of the premium. This needs to be up to date, so you may need to do this semi-annually or annually depending on the policy.

2. Either write a separate check for the stipend with the memo clearly stating the purpose (BC/BS POLICY NUMBER July 2013 for example) OR provide a pay stub to the nanny stating gross wages, itemized deductions, net pay, and the addition of the premium contribution to the net pay as a reimbursement item.

Q. What are the tax benefits to the family?

A. The health insurance premium stipend is not taxable wages. The employer does not include this in the employee’s taxable wages on the W-2 form, and does not pay Social Security and Medicare taxes (7.65%) nor Federal or State Unemployment taxes on the premium (~3.5 – 4% depending on the situation).

Q. What are the tax benefits to the nanny?

A.  Because the health insurance premium stipend is not taxable wages, the nanny does not pay Social Security and Medicare taxes (7.65%) nor income taxes (variable, estimate 15% for Federal and state) on the premium stipend.

A. Are there any audit risks involved?

Q. The biggest risk is that the family is paying the stipend and the nanny allows the policy to lapse. Retroactively this would make the premium stipend taxable, and at that point the family would be on the hook for the employer and employee Social Security and Medicare taxes (15.3% total) as well as the unemployment taxes. This is why it is a best practice to make payments directly to the carrier.

A typical health insurance plan for a healthy single nanny can run $500 or more a month. This is $6000 a year. Many families offer a partial premium benefit at time of hire, and will discuss picking up more in lieu of a raise when the compensation is reviewed.

A family who contributes $3000 a year saves approximately $330 in taxes (11% of the benefit!) and the nanny saves approximately $675 in taxes (about a week’s pay!).

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I came across these tips from the blog.

Understand that you won’t be punching a time clock.ÌýÌýWhile you may be used to starting when the parents leave in the morning and being done when they come home, the role of a Household Manager isn’t so black and white.  An urgent repair may require a vendor call at 7 am, a delivery may have truck trouble or get stuck in traffic, and will now arrive at 8 pm.  It all requires flexibility, lots of patience, and the ability to think quickly, problem solve and multitask.ÌýÌý If you work more than forty hours in the work week you will be compensated for overtime.

Be Organized.  Keeping an accurate and detailed calendar is a must.  I keep a paper calendar for quick reference on my desk, as well as notes on what tasks were completed that day, follow ups to be done and general notes to self.ÌýÌý  I also utilize Gmail and their calendar is great as it syncs with my cell phone and I can color code vendors, school, work and personal appointments. The capability to keep notes on the appointment is a plus as well.   Technology is your friend!  Get to know the latest apps available to help with organization, time management, note taking, mileage tracking and more.

Clearly define your work agreement.  We highly recommend a detailed work agreement.  Since you be doing childcare and household managing make sure the contract covers both.  The contract should clearly define all of the responsibilities and include which role plays a priority in special circumstances, such as sick child, vacations, and inclement weather.  Remember to be flexible.  Not every day goes as planned.

If you are interested in learning more about Household Manager positions please contact us.

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