BenefitsLink logo
EmployeeBenefitsJobs logo
Free Daily News and Jobs

“BenefitsLink continues to be the most valuable resource we have at the firm.”
-- An attorney subscriber
Featured Jobs

Employee Benefits Attorney (Indianapolis IN)
Defined Contribution Administrator (Oak Brook IL)
Associate Fund Counsel (Washington DC)
Plan Administrator (Huntington Beach CA / Ballston Lake NY)
Search all jobs
 
Get the BenefitsLink app LinkedIn
Twitter
Facebook
Jump to content
BenefitsLink Message Boards
matthny

Including Nanny on Payroll of S Corp, Exclude from 401(k)?

Recommended Posts

Hi Folks,

TP is currently using a Nanny payroll provider that isn't doing a good job, and we need a new provider. They run a single member S Corp with payroll for themselves as officer, and have a boilerplate 401(k) plan (Solo/off the shelf).

Using a new 'Nanny specific' payroll firm (reporting on the Schedule H) not only is more costly, but adds a little more complexity than using one service. Perhaps most importantly though, running the wage through the S Corp's payroll provider will force frequent remittance of tax, rather than building a liability that may be overlooked until tax filing day.. and a sudden bill appears.

I see no issue in terms of a controlled group between the S Corp owner and the Nanny if paid via a third party payroll provider 'dedicated to Nanny tax' but wonder if bringing the Nanny onto the S Corp's payroll may cause an issue with ERISA in regards to there being an 'employee on the payroll that is not covered by the plan'. I've not seen a way to specifically exclude a household employee, but also am not sure if the Nanny is considered an employee of the S Corp simply if paid via the S Corp..?

Naturally, would carve out costs of payroll so that the Nanny wages and taxes are not deducted to the business.

Thoughts?

Share this post


Link to post
Share on other sites

how a person is paid does not determine their status as an employee of an organization. PEOs, Leasing companies, Temp agencies, even office sharing arrangements all frequently result in a person receiving pay and a W-2 from an entity that is not their employer. 

who is determined to be an employee is determined based on who has control of the employee (there is a list of factors somewhere the IRS uses as a guideline) but no where on the list is how the person paid or from what entity. 

However, as a stand-in, and for simplicity's sake, usually the payroll of an entity is taken to represent all of the entity's employees. While that is usually true it doesn't sounds like it is true here. 

Though with the nanny on payroll, I would wonder if there would be some sort of presumption they are an employee of the S-corp. 

17 hours ago, matthny said:

I see no issue in terms of a controlled group between the S Corp owner and the Nanny if paid via a third party payroll provider 'dedicated to Nanny tax

What do you mean by the control group comment? Control group status would likely exist regardless of how the nanny is paid. If the same person that employs the nanny as a household employee is the 100% owner of the S-Corp, I don't see how there wouldn't be a control group. 

Household employees (including nannies) are a common control group issue. Years ago I had a client that included their nanny, housekeeper, driver, and helicopter pilot (yes, they had a personal helicopter pilot to carry them around the city) on their business' employee benefit programs for this very reason. 

Share this post


Link to post
Share on other sites

Taxpayer? 

  • Like 1

Share this post


Link to post
Share on other sites
On 3/1/2019 at 12:34 PM, justanotheradmin said:

Control group status would likely exist regardless of how the nanny is paid. If the same person that employs the nanny as a household employee is the 100% owner of the S-Corp, I don't see how there wouldn't be a control group. 

Thanks for the reply. Where I was going with this is that while there is control due to the common ownership, and while payroll is run by the same S Corp... My thought/hope was that it would mean that we did not have to cover the Nanny (unless that was desired).

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
  • Create New...