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20 March 2014 • www.CPAPracticeAdvisor.com FEATURE M o s t e x p e r t s b e l i e v e t h a t domestic worker legislation will pass in some form in most states within the next couple of years. Even in states where a bill doesn't yet exist, the movement has gained traction among workers and stimu- lated an outcr y for basic employ- ment rights. A large workforce that has been quietly operating in the s h adow s for gener at ion s i s now pushing its way into the limelight. Certainly, this has implications for tax professionals. About the DWBOR Legislation Te primar y thrusts of the legisla- tion are 1) wage and hour protec- t i o n s s u c h a s m i n i m u m w a g e , overtime and paid time of, and 2) for ma l employer com mun ication around potentially-abusive aspects of employment – e.g. compensation ag reements, hourly pay track ing , formal paystubs, pay frequency and termination. To be clear, many of these basic employment protections have been covered by the Fair Labor Standards Act si nce 1938. But, up u nt i l t he New York passage i n 2010, t here were ver y few statutes at the state level that recognized and protected domestic workers. No t a bl y, ne i t he r c u r r e nt nor proposed DW BOR legislation call for any changes to the pay roll ta x system for household employers. T he fe der a l a nd s t ate employer obligations have not been part of the discussion, except to the extent that they have brought atention to the i ndust r y 's poor compl ia nce rate. Most experts estimate that roughly four out of f ive families pay their employee illegally – either misclas- si f y i ng t hem a s a n i ndependent contractor or simply paying under the table. A s a result, core worker protec- tions and benefts like Social Security, M e d i c a r e a n d U n e m p l o y m e n t Insurance are not available to many domestic workers. Te lack of these fnancial safety nets, combined with heig htened aw a reness of worker rights created by the DW BOR, has led to a growing demand for legal pay. T he "of f-t he-book s" c u lt u re is changing. A nd we a nt icipate t hat cha nge will be further fueled by two other major market forces: 1) proposed I mmigration Reform bil ls, which afect many domestic workers and ma ndate t hat t hey show proof of work histor y and ta x pay ments in order to gain provisional citizenship status, and 2) the aging of the popu- lation and the resultant grow th of in-home senior care. What does it all mean to tax professionals? A s t he i ndu st r y ma rches towa rd legitimacy, more and more families with domestic workers will be con- fronted with compliance as a condi- tion of employment. In turn, more and more ta x professionals will be confronted with advising clients on this portion of their tax situation. From both a tax and a labor law perspective, it's very important that legal pay be addressed at the time of hire. Payment of taxes is required. In addition, the Domestic Worker Bill of R ights requires clear com- munication of compensation, formal p a y s t u b s , a n d i n s o m e s t a t e s , obtaining a Workers' Compensation insurance policy and/or a Disability insurance policy. Tese employer obligations need to be handled properly from day one or else the family is exposing itself to f i na nc ia l a nd lega l r isk . Most families are under the impression they can drop this on their CPA at tax time and all will be fne. Unfor- tunately, by then, chances are they w ill have made numerous ta x and labor law mistakes that will be costly a nd t i me - con s u m i ng to resolve. A dd it iona l ly, t hey w i l l probably have overlooked numerous oppor- t u n it ie s to s ave mone y t h roug h d e p e nd e nt c a r e t a x b r e a k s a nd non-taxable forms of compensation. Handled correctly, the ta x breaks can ofset most – if not all – of the employer tax cost. The Opportunity We believe tax professionals will see the Domestic Worker Bill of R ights movement as a n oppor t un it y. By proactively addressing these issues with their household employer cli- ent s , t he y w i l l be he lpi ng t he se families • Eliminate risk from audits and labor disputes • Save money • Eensure that their worker gets the benefts and protections he or she deserves. Fa m i l ies, of ten i l l-equipped to address all the payroll, tax and HR a s p e c t s of e mploy me nt , s hou ld welcome st rong g u ida nce i n t h is area – at the time hire, before they've made expensive mistakes. It's the kind of stewardship that is the hallmark of the profession. What the Domestic Worker Bill of Rights Movement Means to Tax Professionals By Stephanie Breedlove W hat began as a modest bill in the 2010 New York state legis- lature has swelled into a full- fedged movement. As of this writing , three states – New York, Hawaii and California – have passed formal Domestic Worker Bill of Rights (DWBOR) legisla- tion protecting household employees and 10 more states have bills currently under consideration. Stephanie Breedlove is head of Care.com HomePay, formerly Breedlove & Associates, a household payroll specialist. Care.com helps connect families with care providers, whether a babysiter for an occasional date night, care for seniors, pet companions or housekeeping. THE "OFF-THE-BOOKS" CULTURE IS CHANGING. CPA 0314 1-21.indb 20 3/24/14 9:37 AM