Household Employees and Employment Taxes

Household workers can either be employees or self-employed. If they are considered employees, their employers must pay employment taxes. Examples of household employees include cooks, housekeepers, nannies, private nurses, and chauffeurs. If you have workers providing their services at your home, you need to determine if they are technically your employees and what taxes you are responsible for paying.

Is Your Worker an Employee?

For tax purposes, a household worker is an employee if you control what work they do and how the work is done. If both these criteria are met, the household worker is your employee. If the worker determines how the work is done, then the worker is self-employed and not your employee. For example, a child care service provider that works in their home is not your employee. A nanny who provides light housekeeping and child care services in your home, however, could be your employee.

Do You Need to Pay Employment Taxes?

If you pay any household employee $2,200 (2020 tax year) or more in a calendar year, you must withhold employment taxes (Social Security and Medicare – also known as FICA) from their wages. Additionally, you will be responsible for paying the employer portion of Social Security and Medicare. You will also need to pay federal unemployment taxes (FUTA). If you fail to withhold Social Security and/or Medicare from your employees’ wages, you’ll also be responsible for paying their FICA portion.

Federal Tax Forms For Household Employees

As an employer, you must verify that your employees are eligible to work in the United States. You will also need to complete a Form I-9, as well as a New Hire Report, and W-4 for each person you employ.

In addition to the employment forms, there are three tax forms you will need to complete and file.

• Form W-2, Wage and Tax Statement. Required for each household employee. Includes wages earned for the previous year, as well as any income taxes, Social Security, and Medicare taxes withheld. The form must be filed by February 1, regardless if you file electronically or by paper. You must give Copy B and C, as well as Copy 2, to your employee no later than February 1. Retain Copy D for your records.
• Form W-3, Transmittal of Wage and Tax Statements. Form W-3 is sent to the Social Security Administration along with Copy A of Form W-2. It must be filed by February 1 and can be done online. You must complete a W-3 even if you only have one W-2 to file.

Schedule H, Household Employment Taxes. If any of the following are true, you must file this form: you paid a household employee $2,200 or more (2020 tax year), you withheld federal income tax from an employee’s wages, or you paid a total of $1,000 or more to an employee in any calendar quarter (2019 or 2020). Schedule H should be filed with your Form 1040, or on its own if you aren’t required to file a federal tax return. The deadline to file is April 15.

Depositing Employment Taxes

Employment taxes can be deposited either monthly or semi-weekly. Under the monthly deposit schedule, deposit employment taxes on payments made during a month by the 15th day of the following month. Under the semi-weekly deposit schedule, deposit employment taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Deposit taxes for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday.

Employers who deposit monthly or semi-weekly should only report their deposits quarterly or annually by filing Form 941 or Form 944.

If you’re unsure whether you need to pay taxes on a household employee or need assistance with completing the necessary paperwork, contact Tax Assistance Group. We offer affordable tax preparation services that will help keep you compliant and out of trouble with the IRS.