I hired a nanny who’s on break from college to take care of my kids for the summer since I’ve gone back to work. I pay her “on the books” – tax withholding, workers comp, etc. She’s peeved that I’m withholding and not just paying her cash (which is particularly galling since I’m trying to follow the law and she claims to want to be going to school to become a lawyer) and has now started to make demands based on her and her dad’s understanding of tax laws. The latest demand is that I pay her 48 cents per mile for mileage expenses, claiming it’s “required” by the IRS. Right now, I pay her a gas allowance every week to cover actual gas costs in transporting my kids around. It is my understanding that the IRS’s standard mileage rate exists so that employers know the maximum amount they can deduct as a business expense for transportation costs incurred in the course of their business. It is NOT a requirement that employees who use their cars for business purposes be reimbursed according to the standard mileage rate. I can reimburse according the mileage rate (or less than the prescribed mileage rate), pay a gas allowance or even do nothing; the IRS doesn’t care. I’d like to find a statement of this fact by either the IRS or an established tax provider. I’ve searched the internet and can’t seem to come up with anything. Can anyone help? I’d like to have a piece of paper to show her that she’s wrong.
FWIW, we’re giving her one more week. She’s already extorted an additional $1 an hour, tried to get paid for time my kids are in camp and she’s at home napping, and claimed 9(!!) exemptions on her W-4. If this nonsense keeps up, she’s gone.
Sounds like a PITA. I think I would have been happy to just pay cash under the table.
I get 1099’d for a job. I don’t get mileage reimbursement, but I do get to write the full amount off on my taxes. I think that I have to declare how much reimbursement I receive (in my case, none). I have always assumed that was because I could only write off unreimbursed mileage. But then, I am only a stupid fireman not a brilliant tax attorney!
Tell young whippersnapper she can file and unreimbursed mileage expense claim with her taxes. Can’t remember the form number but it is enough of a pain in the butt to let the mileage go.
Also, if being a nanny is her job she cannot claim mileage to and from your house, only the cost of carting the kids around for work.
Sounds like you have your hands full with this one. My understanding is like yours. The 48 cents is established as what can be deducted from your taxes as a legitimate business expense. The IRS is only interested in taxes. But not a tax attorney either.
It is my understanding that the IRS’s standard mileage rate exists so that employers know the maximum amount they can deduct as a business expense for transportation costs incurred in the course of their business. It is NOT a requirement that employees who use their cars for business purposes be reimbursed according to the standard mileage rate. I can reimburse according the mileage rate (or less than the prescribed mileage rate), pay a gas allowance or even do nothing; the IRS doesn’t care.
I’m no expert, but I am pretty sure you’re right about that, and also pretty sure that you’re not going to find an IRS document that says “employers are not obliged to pay employees’ mileage for use of their private cars”. Can you put the burden of proof on her and have her show you the rule that she thinks compels you to provide mileage reimbursement? Be sure that anything she shows you pertains to household employers. You aren’t a small business.
And, not to meddle, but I think you’d do well to let her go. I am not sure I’d want someone watching my kids who was angry with me for not lying to the Govt and wanted to exploit every conceivable rule to her exclusive benefit. Kinda makes you wonder how she feels about traffic laws and other things she doesn’t think ought to apply to her.
If she’s not working while the kids are at camp, you can say, “You aren’t needed while the kids are at camp… and therefore you are not paid unless you are doing something for the kids or the household”.
While it’s a pain for her that you are doing withholding, she may appreciate it later - and she’ll get it back anyway at tax time.
Sounds like she’s practicing some of her argumentative processes on you, which is silly because you are a lawyer too. LOL! This may be her first opportunity to have an “employer talk” to learn what’s expected of her conduct. I do say that many employers are unfair in their practices, but, as a former ‘nanny’ myself, it’s NOT hard work when the kids are good. Her Dad may be goading her on with this behavior; possibly due to his own troubles with an employer. (I’ve seen this before).
Give her a warning before you consider firing her. Tell her all of your concerns. Allow her to hear them and understand… and she can make her own choices whether the job is valuable enough to stay within your businesslike dealings… or whether she just wants to go wait tables where the work is harder, longer, and messier.
It is NOT a requirement that employees who use their cars for business purposes be reimbursed according to the standard mileage rate. I can reimburse according the mileage rate (or less than the prescribed mileage rate), pay a gas allowance or even do nothing; the IRS doesn’t care.
The IRS may not care. (But anything above the prescribed mileage rate will be considered it “wages” subject to applicable payroll taxes and withholdings.)
However, under California law at least, an employer has an obligation to reimburse employees for expenses incurred in the course of employment. If employees must drive their own car during the course of their employment, you must reimburse them for reasonable expenses. And a gas allowance alone may not be sufficient, if it doesn’t cover other related expenses, such as insurance, maintenance, repairs, etc. The IRS rate may be presumptively sufficient to reimburse all expenses. A California employer that reimburses at a lower rate certainly runs a risk of not reimbursing for all expenses.
On a side note. What is in her job description? It seems like you have already covered this with the gas allowance. The mileage deduction is her responsibility when she files. Since I am a bit suspecious by nature, it sounds like she is just trying to manipulate you. Make plans to replace her. Would you want somebody who is ticked off at you watching your children?
Or, as an option, maybe you can switch her to independant contractor status, and make her responsible for all the tax issues? She will be happy to get more, up front, in her paycheck. But, it will certainly wake her up when she files her tax return, to see how much more she will have to pay.
It is my understanding that the IRS’s standard mileage rate exists so that employers know the maximum amount they can deduct as a business expense for transportation costs incurred in the course of their business. It is NOT a requirement that employees who use their cars for business purposes be reimbursed according to the standard mileage rate. I can reimburse according the mileage rate (or less than the prescribed mileage rate), pay a gas allowance or even do nothing; the IRS doesn’t care.
I think that’s probably true. If you’re not going to pay anything, she’d be able to use the 48.5 cent/mile rate as a business deduction.
That said, I’ve never had an employer who didn’t reimburse at the IRS rate for mileage incurred during business. That’s how it’s done.
The IRS rate exists for a good reason: It isn’t just the gas that costs money in operating a car.
**That said, I’ve never had an employer who didn’t reimburse at the IRS rate for mileage incurred during business. That’s how it’s done. **
Not always. In my slave labor (pizza delivery) days they paid me 50 cents per delivery with no regard to how far I went or if I was able to make multiple deliveries in one trip.
In my slave labor (pizza delivery) days they paid me 50 cents per delivery with no regard to how far I went or if I was able to make multiple deliveries in one trip.
You’re right, I forgot about that, and I used to deliver pizzas, too. Sheesh.
Still, it’s different- you’re really working for the tips. Kinda like how waitresses don’t have to be paid minimum wage.
I understand why you would want to keep it above board, but why not require her to be a 1099 independent contractor instead of an employee? I don’t know all that much about it, but would that keep you out of trouble by reporting her as a 1099 and also put it on her to pay her own taxes or at least file. As a student she’s not going to have to pay much in taxes she’s just got to report the income as a 1099 contractor.
If she doesn’t want to do the 1099 option, then let her go.
You can’t just “require” someone to be an independent contractor. I would love to 1099 her wages and let her take care of it, but she doesn’t qualify as an independent contractor. The IRS sets out the various requirements necessary to designate someone an independent contractor. If it didn’t, everyone would call their employees “independent contractors”; it would save us a bundle of cash.
As it so happens, the nanny and I had a discussion this morning about my concerns. She still feels like I’m underpaying her and talked about how she understood this was part of “negotiations.” I told her there were no “negotiations”; our terms were set and if she couldn’t live with them, then she might want to find other work. She opted for the other work, so today is her last day. I sort of anticipated she might do this and made tentative arrangements with a neighbor next door. As much as this is a pain in the butt for me, I feel a certain amount of relief that I won’t be fighting wage battles with this young 'un anymore.
First I’m unaware of any law that forces you to pay for reimbursement, but I’m also wondering why anyone would drive their car as part of their job if they weren’t being reimbursed.
Second you have two choices for reimbursement. Either the standard amount per mile driven or all expenses for the vehicle. Typically the later is a viable alternative only in the case of company cars. IOW you get to deduct, gas, repairs, maintenance etc expenses. Would be a huge Pain the arse to prorate everything for a “part time” vehicle and you probably run the risk of being on the hook if something major exploded on the vehicle.
So if there is a law, I’d guess there is as they cover everything else, then you aught to just pay the amount per mile and move on.
My BIG concern however is not any of this but the fact that I wouldn’t feel in the least bit comfortable leaving my kids with someone whom was so pissy. Sounds to me like the relationship is a bit sour and likely your kids are taking crap for it.
Check out IRS Pub 463. It states something to the effect, “you may use the standard mileage rate whether or not you are reimbursed by your employer.” Inference is that it is optional for an employer to reimburse, or if not or not reimbursed fully, for employee to deduct on income taxes. If you want help, just call your local IRS office and ask them your question.
As far as giving a monthly allowance vs. using the standard IRS rate for actual mileage–if you are telling her where and when to go, it is not really up to her judgement when to use her car, and it would be more equitable for both parties, IMO, to give her reimbursement based on actual miles driven rather than a flat allowance. It should be easy for you to figure out using Google or Yahoo how much mileage to allow for trips to the swimming pool, doctor’s office, or whatever.
You can reimburse more or less than the IRS allowance–that should be an agreed upon matter before hiring. If you reimburse less, the employee can claim the difference. If more, they will have to report it as income.