Hans Kasper, MS-CPA, PS

Household Employees
 

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You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.

Example.

You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.

Household work.   Household work is work done in or around your home by the following people.

·        Babysitters (does not include teenagers that sit once in a while)

·        Cleaning people

·        Drivers

·        Housekeepers

·        Nannies

·        Health aides

·        Private nurses

·        Maids

·        Caretakers

·        Yard workers

·        Similar domestic workers

Workers who are not your employees.   If only the worker can control how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.

A worker who performs child care services for you in his or her home generally is not your employee.

If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

Can Your Employee Legally Work in the United States?

It is unlawful for you knowingly to hire or continue to employ an alien who cannot legally work in the United States.

When you hire a household employee to work for you on a regular basis, you and the employee must complete the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification.

Table 1. Do You Need To Pay Employment Taxes?

IF you ...

THEN you need to ...

A-

Pay cash wages of $1,500 or more in 2007 to any one household employee.

Withhold and pay social security and Medicare taxes

 

Do not count wages you pay to—

·        Your spouse,

·        Your child under the age of 21,

·        Your parent (see page 4 for an exception), or

·        Any employee under the age of 18 at any time in 2007 (see page 4 for an exception).

 

·        The taxes are 15.3% of cash wages.

·        Your employee's share is 7.65%.
 (You can choose to pay it yourself and not withhold it.)

·        Your share is a matching 7.65%.

B-

Pay total cash wages of $1,000 or more in any calendar quarter of 2007 to household employees

Pay federal unemployment tax

 

Do not count wages you pay to—

·        Your spouse,

·        Your child under the age of 21, or

·        Your parent.

 

·        The tax is usually 0.8% of cash wages.

·        Wages over $7,000 a year per employee are not taxed.

·        You also may owe state unemployment tax.

Note. If neither A nor B above applies, you do not need to pay any federal employment taxes. But you may still need to pay state employment taxes.

State employment taxes.   Household employees must also be covered by Washington State Employment Security and, if there is more than one employee at a time, they must also be covered by Washington State Labor and Industries.  To obtain this coverage, you must complete a Washington Master Business Application.

Social security and Medicare wages.   

If you pay your household employee cash wages of $1,500 or more in 2007, all cash wages you pay to that employee in 2007 (regardless of when the wages were earned) are social security and Medicare wages. However, any noncash wages you pay do not count as social security and Medicare wages.

If you pay the employee less than $1,500 in cash wages in 2007, none of the wages you pay the employee are social security and Medicare wages and neither you nor your employee will owe social security or Medicare tax on those wages.

Table 2. Household Employer's Checklist

   You may need to do the following things when you have a household employee. 

When you hire a household employee:

□ Find out if the person can legally work in the United States.
□ Find out if you need to pay state taxes.

When you pay your household employee:

□ Withhold social security and Medicare taxes.
□ Withhold federal income tax.
□ Make advance payments of the earned income credit.
□ Decide how you will make tax payments.
□ Keep records.

By January 31:

□ Get an employer identification number (EIN).
□ Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement.

By February 28:

□ Send Copy A of Form W-2 to the Social Security Administration (SSA).

By April 16:

□ File Schedule H (Form 1040), Household Employment Taxes, with your federal income tax return (Form 1040). If you do not have to file a return, use one of the other filing options, such as the option to file Schedule H by itself.

How Do You Make Tax Payments?

When you file your federal income tax return, attach Schedule H (Form 1040), Household Employment Taxes, to your Form 1040. Use Schedule H to figure your total household employment taxes (social security, Medicare, FUTA, and withheld federal income taxes). Add these household employment taxes to your income tax.

Employer identification number (EIN).   You must include your employer identification number (EIN) on the forms you file for your household employee. An EIN is a 9-digit number issued by the IRS. It is not the same as a social security number.  

You ordinarily will have an EIN if you previously paid taxes for employees, either as a household employer or as a sole proprietor of a business you own. If you already have an EIN, use that number.

If you do not have an EIN, get Form SS-4, Application for Employer Identification Number. The instructions for Form SS-4 explain how you can get an EIN immediately by telephone or in about 4 weeks if you apply by mail. In addition, the IRS is now accepting applications through its website at www.irs.gov/businesses/small.

Form W-2.   File a separate Form W-2, Wage and Tax Statement, for each household employee to whom you pay either of the following wages during the year.

·        Social security and Medicare wages of $1,500 or more.

·        Wages from which you withhold federal income tax.

You must complete Form W-2 and give Copies B, C, and 2 to your employee by January 31.

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This page was last updated on 05/13/2010

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