Saturday, February 07, 2009

Killifer and the Impossibilities of the "Nanny Tax"

I have to admit I haven't been following the issues surrounding members and potential members of Obama's cabinet all that closely. I didn't even know who Nancy Killifer was or what the Chief Performance Officer was. But when I learned that she withdrew her name because she failed to pay enough payroll taxes for her nanny I became intrigued.

First, I did some research on Killifer and the position. As this Time article reveals, the woman is imminently qualified for this new position. Her profile on, a site for potential head hunters, clearly reiterates the qualifications outlined in the Time article. Since the position of Chief Performance Officer is meant to streamline government efficiency, I think, given the little I've read about her, that Killifer was the right person for the job.

On to the Nanny Tax. A quick read of an article at Newsweek reveals the pitfalls of the Nanny Tax. This is, apparently, an impossible tax to calculate correctly, particularly for parents who choose to do it themselves rather than pay a payroll company a lot of money to do it for them. On one level, I think it is probably not a good idea for the average parent who hires a nanny to try to calculate this tax on her own. But then, I think about all the parents I know who use a nanny or a babysitter and end up paying them more than the minimum of $1,800 a year that these individuals can be paid without the employer having to pay payroll taxes. Sure, lots of these people pay their nannies in cash, which isn't traceable. But I know lots of moms who simply ignore this rule. And a lot more moms and dads who use babysitters and can't afford to pay their sitters a competitive wage AND pay payroll taxes.

I was employed by one such family the summer before I started working on my MA. The family paid me a base pay of $9 an hour to care for their 2 children a minimum of 40 hours a week; if I worked more than 40 hours, I was paid $15 an hour for any hours over 40. I typically worked 60 hours a week, so I was getting paid over $600 a week. Now, they paid me under the table, and they paid me so well because they wanted a college graduate who was certified in CPR to care for their children. But I also know that both parents rushed home every day from their jobs so that they wouldn't go over the 60 hours a week that I averaged--because they couldn't afford to pay me more. But given that I was employed for about 14 weeks, I clearly made more than the $1,800 I could legally make before they were supposed to pay payroll taxes on my income. These were not dishonest people by any stretch; they simply wanted to pay me a competitive wage because they wanted someone trustworthy, educated, and caring to look after their kids.

I think most parents are in a similar situation. They want to do the right thing by their employees, and often the right this is either paying the nanny more or complying with payroll tax laws. Now, clearly, Killifer can afford to pay these taxes, but nothing I've read indicated she didn' t pay these taxes. Rather, she just paid them incorrectly from time to time. It strikes me as incredibly unfair that a person who was highly qualified for a job had to withdraw herself from consideration for struggling to pay the correct amount of payroll taxes for her nanny. Let me emphasize that again: Killifer didn't fail to pay the taxes; she just didn't always get it right.

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