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Income received by Household Employee (Nanny)

Richard1024
Level 2

Hello, a few days to go before the stimulus dollars are mailed out & I have a client with no 2018 or 2019 return filed. Now the question, I wanted to get the community’s thoughts. Married couple, one collects a W2, the other works as a nanny & was not issued either a W2 or 1099.  Based on the work performed (for one specific family), taxpayer should have been issued a W2.  I don’t think the employer intended to issue a W2 or wanted to.  I’m reviewing publication 926 for Household employers & some other materials on the matter & wondering at this point considering the timing, would you?

  1. Although late, instruct taxpayer to ask employer for a W2,
  2. submit a 4852 (substitute W2) and gross up the net amounts provided by taxpapyer (possibly resulting in a flag for the employer)
  3. Schedule C with or without deduction for expenses (client provided mileage to reduce income)

Don’t seem to be any good/better options but hoping to get some ideas.  Thanks! 

Rich

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sjrcpa
Level 15

The unintended consequences of working under the table. I bet your client was a party to this arrangement, too, rather than just "I don’t think the employer intended to issue a W2 or wanted to. "

No matter whether your client received a W-2 or not, she earned taxable income which should be reported. Does she still have the job, and still want it? Filing 4852 is going to "out" the employer.


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sjrcpa
Level 15

The unintended consequences of working under the table. I bet your client was a party to this arrangement, too, rather than just "I don’t think the employer intended to issue a W2 or wanted to. "

No matter whether your client received a W-2 or not, she earned taxable income which should be reported. Does she still have the job, and still want it? Filing 4852 is going to "out" the employer.


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qbteachmt
Level 15

This is confusing: "& I have a client with no 2018 or 2019 return filed."

Because you told us a Married Couple, and one is getting a W2. That means the Spouse is already on the MFJ return? And would be counted for the stimulus, already. None of the rest of this dialog applies.

A lot of people are confusing the Stimulus check, which is more like "because you are a citizen" with the Paycheck Protection act, which has no employee responsibilities.

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Richard1024
Level 2

Thanks for the update.

Yes - I think the client may have only told me half the story & possibly may have been a party to the ‘arrangement’.  Taxpayer still works for employer and really does like the job.  As such, I am leaning towards step 1 – ask for W2 now and going forward and if not possible for 2019, jump to step 3 with the potential that any expenses taken may be disallowed if the IRS do not agree with the step 3 option.  The client is “doing the best they can to comply with their filing requirement” with the information they have (which is nothing in the form of a W2) 🙂

As for Stimulus payment, there appears to be current updates/guidance regarding the completion of a simple return for non-filers.  Agreed, my comments regarding the timing and stimulus payment do not apply (Relating to not having filed either a 2018 or 2019 tax return)

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sjrcpa
Level 15

The simple return for nonfilers (or whatever it is called on the IRS website now) is for those who were not required to file, not for those who just didn't bother to file.


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Richard1024
Level 2

Great, thank you for the update on that.  Much appreciated! Yes the plan is definitely to get these returns appropriately filed as soon as possible.

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