August 2, 2019
Are You a Household Employer and Do You Owe Taxes?
Posted by Tasha Clark
Did you know that you might be an employer and not even realize it? Per the IRS, if you hire someone to do work around your home, then you might be considered a household employer and be required to pay employment taxes in addition to other liabilities.
If you control what work is done and how it is done, you provide supplies for the work and the work is of a household nature, then you have an employee.
Common examples of household employees include:
- Private nurses
Some examples that are not household employees are:
- Private secretaries
- Spouses (sorry!)
Once you have determined that you have a household employee, the next step is to determine what taxes need to be paid and if you will withhold taxes or pay them on the employee’s behalf. The amount you pay in cash wages will determine your tax liability.
For example, if you pay more than $2,100 in wages in a calendar year, you are responsible for Social Security and Medicare taxes (a total of 15.3%). You have an option to pay both the employee and employer taxes or to withhold the employee portion. The state you are in will also impact what taxes you might be liable for. In California, household employers must report wages of $750 or more in a calendar quarter.
Before you hire someone for your household, you should consider what you might be liable for and how you will handle your tax liability. Basic household payroll compliance includes:
- Registering with the IRS
- Registering with the state unemployment agency
- Reporting and paying federal and state taxes
- Processing annual tax filings
- Following applicable wage and hour requirements (minimum wage, overtime, etc.)
- Obtaining worker’s compensation coverage
To ensure full compliance, it is important to understand the type of employee(s) you have and what federal or state requirements must be met. Resources are provided by the IRS and state agencies such as the California Employment Development Department. You can also contact your state tax department or unemployment office to ensure you understand specific jurisdictional laws.
If you would like more information or have any questions regarding being a household employer, reach out to our HR Solutions team. We are happy to help.
Tasha contributes as a Manager in Armanino’s HR Outsourcing Consulting practice. Tasha brings 15 years of experience in payroll. She has worked extensively with labor unions in the construction business as well as payroll state taxes. She earned her MBA and Bachelor of Business Administration in Human Resources and Accounting from Boise State University. Prior to joining Armanino, Tasha worked as a Payroll Manager for AECOM, an engineering firm.