Even if you just have someone to take care of your children, you are an employer. You don’t need a Downton Abbey-size staff to fall under IRS rules. Even if you have just one part-time employee, you should check IRS Publication 926, which explains your responsibilities.
First, consider whether you are an employer. The IRS says you are if “you can control not only what work is done, but how it is done.” It’s irrelevant if the worker is full- or part-time or whether you hired the worker through an agency or from a list provided by an agency or association. Nor does it matter whether you pay the worker on an hourly, daily or weekly basis, or by the job.
However, a worker who performs child care services for you in his or her home generally is not your employee, says the IRS. And if an agency provides the worker and controls what work is done and how it is done, the worker is probably the agency’s employee, not yours.
With a few exceptions, if you pay cash wages of $1,900 or more to any one household employee, you must withhold and pay Social Security and Medicare taxes. (Thresholds and amounts are subject to change.) You and your employee each have to pay 7.65 percent. Some employers pay the entire 15.3 percent; this is not mandatory, but it is legal.
If you pay total cash wages of $1,000 or more in any calendar quarter, you also have to pay federal unemployment tax. This take is 6 percent of cash wages, although wages over $7,000 a year per employee are not taxed. And you may owe state unemployment tax.
The IRS also provides a handy checklist for employers of household help, shown below. Dates may change somewhat from year to year.
Give us a call to discuss your household help, and we can assist you in the financial and tax aspects of your hiring decisions.
|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.
Decide how you will make tax payments.
|By February 1:||Get an employer identification number (EIN).|
Give your employee Copies B, C and 2 of Form W-2, Wage and Tax Statement.
|By March 1 (March 31, if you file Form W-2 electronically):||Send Copy A of Form W-2 to the Social Security Administration (SSA).|
|By April 15:||File Schedule H (Form 1040), Household Employment Taxes, with your annual federal income tax return (Form 1040, 1040NR, 1040-SS, or Form 1041).|
If you do not have to file a return, file Schedule H by itself.
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