So, you had a household employee (nanny, caretaker, etc.) and never ran payroll.
You may not have issued a 1099, any 941s, any W2 or W3. You may also not have this person’s SSN or ITIN number.
This is a very common situation. None of this is to scare you, just to list out the issues that sometimes arise. Here is a quick run down:
- If you had a household employee, before hiring the person, you should have registered with at least several of the following:
- The state as an employer
- Workers Compensation
- Disability Insurance
- Unemployment Insurance
- You should also have been filing 941s and possibly other quarterly forms as well as annual 940s, W2s, and W3s
- If you attempt to retroactively file these items now, you will likely be penalized by many of these agencies.
- Filing a 1099-NEC would also not be correct, since the person was technically an employee and misclassifying them is a bit of a risk with the state department of labor or any of the agencies listed above.
- The agencies above normally only find out about unregistered employees when the household employee goes to file for unemployment, at which point the state questions how there is unemployment if they do not have record of your being an employer in the first place. This is an area that some states are aggressive with, since the withholdings that go along with payroll go into state pools used to fund disability, workers comp payments, unemployment benefits, and other items. When employers “skip out” on paying into these funds (by not running payroll), some states file penalties.
- As a licensed professional, I cannot tell you to ignore the situation, however, there is no perfect solution & I generally ask for clients in this position to schedule a quick call to review what most practical people do when they are faced with this dilemma. Please let me know if you are interested in booking a consulting session.
The good news: we can walk through some practical ideas on what may be best in this situation (and most clients end up with no issues with the state or IRS). If you are interested, please let me know & we can schedule a call.
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