Hello fellow tax paying nannies! Tax season can be, well, TAXING! How do you know whether you are an independent contractor or a household employee? You’ll find out in this video as well as how to do those taxes!
In real time, I do my taxes in 4 hours! You can watch me do them in 13 minutes! 👆
If you are not sure whether you are an independent contractor or an employee, review the checklist at the bottom of my blog, Self Employed vs. Household Nanny. Then, come back and tax with me!
In summary, according to the 929 Household Employees Tax Guide found in the deep dark hole that is the IRS website, 3 things are considered when deciding how to file:
- How is the work done?
- Where is the work done?
- Who provides the tools?
Consider speaking to a local, professional tax agent. It might be helpful to note this quote from the H&R Block website:
If the babysitter controls how the work is performed, the babysitter is self employed…Self employed workers usually provide their own tools. They offer their services to the general public in an independent business. – H&R BLOCK
Whether you decide to file as a contractor or an employee, this video will help you get your tax numbers in order!
Let the Fun Begin!
This is the binder I use to keep track of EVERYTHING nanny related including contracts, daily logs, invoices, and it is my KEY to effortless taxes at the end of the year. I have everything right in front of me on paper, which makes entering the figures in the tax site a breeze! So, what are we waiting for? Let’s do some taxes!
Stage #1 - Receipts
KEEP YOUR RECEIPTS! This may seem old fashioned, but you need to have accurate documentation of all your expenses. I label the top of each receipt throughout the year as either work or personal. This makes the sorting process easier!
Pro banking tip 📢 Bank with credit unions as they typically have great interest rates and free savings accounts!
STAGE #2 - PRINT
Ah yes, the trusty printer gets a workout come this time of the year. I prefer paperless statements during the year but for taxes, I print them ALL out so I can have everything right in front of me. Then, I go through and highlight everything considered a work expense or income. But, I’m getting ahead of myself because before highlighting comes….
STAGE #3 - ASSEMBLE
If you haven’t already done so, get your nanny binder assembled! This part of the video is found at the 5 minute mark. Please note, my personal nanny binder is made with inferior materials than the ones I sell.. But she still cute 😉
Create monthly tabs so you can have everything in its proper category and NOW FOR THE FUN PART!
STAGE #4 - HIGHLIGHT
Pick three colors – one for business supplies, one for business related bills, and one for income deposits. Make yourself a color key to refer to on the front of the statements! Make sure you cross reference your receipts and whatever app you use to get paid so you can confirm accurate numbers!
But, how do you know what is considered a business expense? Here are a few that I keep track of:
- Work clothes
- Any non reimbursed purchase for the children
- Continued education expense
- Your Complete Nanny Binder! 😀
- Office supplies (e.g., printer, paper, highlighters, whiteout lol)
Filing independently means filling out a Schedule C which requires you to have very specific documentation of expenses. So, it’s important to separate out specific bills from generic “office supplies”.
The Complete Nanny Binder also includes a mileage reimbursement tracker! So, don’t forget to use it!
Pro spending tip 📢 Never use cash! Credit cards make for a great paper trail. Choose a card that earns you some flyer miles or something! You might as well get rewards for all that inevitable spending.
STAGE #5 - TOTALING
Break out that trusty calculator because you’re about to do a LOT of addition! Add together all the entries with the same highlighted color and put the total on the front of each monthly statement. Then add together each monthly total for the yearly grand total.
Easy peasy, am I right?!
So there ya have it! Taxes made easy! Now’s the time to do your taxes and if you’ve already done them for last year (you must be a robot) you still need the Nanny Binder to keep track of your life this year!
Love you all and HAPPY TAXES!