BREEDLOVE LEGAL REVIEW

 

  

The Legal Review

BRINGING THE LAW TO LIFE

 

 

March 2014  

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“You have been incredibly helpful. I’m glad I didn’t pay to talk to someone at Turbo Tax.
                         
 Danielle Burr, Arlington, VA
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QUICK TAX FACTS

 

$1,900: Social Security & Medicare (“FICA”) reporting threshold
  

 

$1,000: Unemployment reporting threshold (some state thresholds are lower)
  
 

$2,500: Total childcare tax breaks available for families who pay legally
  

 

1.5: Overtime rate of pay when live-out employees work more than 40 hours in a 7-day work week 
  

 

$0.56: 2014 Mileage reimbursement rate
  

 

$7.25: Federal minimum wage (some state rates are higher)
  

 

55: IRS estimate of annual hours needed to manage household payroll & tax compliance process
  

 

$2: Approximate daily cost to have Breedlove & Associates handle all payroll and tax compliance duties with no work, no worry and no risk.
  

 

HELPFUL

LINKS

 

 

 

  
  

 

Nanny Tax Requirements by State

 

 

 

Expert Advice

 

 

 

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Nanny Tax Video 

 

 

  

 The Household Employer’s Financial, Legal & HR Guide 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

 The Legal Review shares findings from real-world household employment situations in an effort to help families understand and avoid potential payroll, tax and labor law issues. 

 

 

BANKING HOURS – WHY IT DOESN’T PAY OFF

 

The Lawson family wanted to take an impromptu vacation after Mr. Lawson received a promotion. The family scrambled plans together and organized a five day reprieve from work and responsibility. The best part of the trip for Mr. and Mrs. Lawson would be the opportunity to take their first vacation with their two-year-old son who was usually supervised during the day by the family’s nanny.

 

The Mistake 

 

The Lawson’s nanny was their first household employee. They were paying her on the books for the (generally) 40 hours per week she worked (8 hours per day, Mondaythrough Friday) and even gave her five paid vacation days per year. The family chose to not take their nanny on vacation with them and let her know she could simply take the week off. However, they did not discuss how this time off would be interpreted with respect to her vacation time.

 

Several months after the Lawsons came back from their vacation, their nanny requested to take all five of her paid vacation days to spend time with her parents and extended family who lived several states away. The family informed her that they already paid for her vacation days when they took their trip. However, to avoid conflict, the Lawsons let the nanny take her vacation with the agreement that they would bank those 40 hours by having her work an extra two hours “off the clock” every day for next four weeks after she returned.

 

The Law

 

Federal wage and hour law does not allow employers to average the hours their employees work across multiple weeks – meaning they should be paid for every hour they work during the workweek the hours are accumulated. The Fair Labor Standards Act (FLSA) defines a workweek as seven consecutive 24-hour periods. Any hours worked in excess of 40 during a workweek are required to be paid at an overtime rate of at least 1.5 times the employee’s regular rate of pay. These laws are in place so employers cannot carry over hours from week to week to avoid paying an employee overtime.

 

The Mess

 

After two weeks making up for hours already paid to her, the nanny became frustrated with having to stay late at the Lawson’s home. She confided in her roommate who was attending law school and explained a few things to her about labor law and the FLSA. The nanny confronted the family about the “off the clock” hours and the lack of overtime. She asked that the Lawsons allow her to resume her normal working hours and be paid time-and-a-half for the 20 hours of overtime she had already accumulated. The family, unfamiliar with the law, had to make an emergency call to their accountant to verify what their nanny claimed was true.

 

The Outcome

 

The Lawson’s accountant utilized Breedlove & Associates to handle the family’s payroll and taxes and made a quick call to our office. A consultant informed her that the family indeed had to pay their nanny for the 20 hours of overtime she worked. Because the nanny was earning $18/hour, the 20 hours of overtime resulted in an additional $540 in gross wages having to be added to the nanny’s next paycheck. The financial dispute between the family and the nanny ultimately created an awkward employer/employee relationship for both parties and the Lawson’s nanny quit after the end of the calendar year.

 

How the Whole Thing Could Have Been Avoided

 

If the Lawsons and the nanny had discussed how the family’s vacation would be viewed before they left, each side could have avoided the initial conflict. Additionally, the family could have reached out to Breedlove & Associates – or asked their accountant to do so on their behalf – before deciding to carry over the nanny’s hours. When there are variances from the normal workweek, it’s important for employers to verify all labor laws are followed before proposing or agreeing to any changes.

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