Below are a few of the more common questions I receive from families hiring household employees. Please contact me directly with questions pertaining to your unique situation. Click on the question to learn more about it.
Below are a few of the more common questions I receive from families hiring household employees. Please contact me directly with questions pertaining to your unique situation. Click on the question to learn more about it.
Below are a few of the more common questions I receive from families hiring household employees. Please contact me directly with questions pertaining to your unique situation. Click on the question to learn more about it.
Yes, if you have a domestic employee working for you in your home, you are a household employer. Examples include a nanny, a home health aide, or a personal chef. Your employee is not an independent contractor. As a household employer, you are responsible for withholding and depositing Federal income taxes plus your employee’s share of payroll taxes (Social Security and Medicare). You also must withhold and pay state taxes (Paid Family & Medical Leave, and WA Cares). Finally, you are responsible for paying the employer’s share of payroll taxes, plus Federal and state unemployment taxes.
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You must file quarterly state wage reports and pay the related state unemployment taxes, paid family & medical leave premiums, and WA Cares premiums on your employee’s gross wages. These reports and payments can be done online.
You should also make estimated Federal tax deposits to the IRS throughout the year. A convenient way to do this is by making your deposits online via IRS Direct Pay or EFTPS.gov. You can also pay by voucher + check.
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Domestic employees are deemed non-exempt employees, which means they are entitled to minimum wage and overtime pay. The minimum wage varies from state to state, and overtime rules vary as well, though overtime is generally considered to be more than 40 hours/week.
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You are generally not required to provide worker's compensation coverage, however it can vary by state. All states require employers to pay into state unemployment funds, which pay laid-off employees while they find another job. If you terminate your employee (without cause) and s/he claims unemployment benefits, you do not pay more into the state pool, but your unemployment tax rate may increase if you hire another employee.
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Many employers contribute funds toward their employee’s health insurance policy, though you are not required to do so. The contribution – either via paycheck or direct payment to the health insurer – is not taxable to either employee or employer. If the policy is purchased through the Health Insurance Marketplace, you may be eligible for the health insurance tax credit on your personal tax return.
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Each family is considered a separate employer from the perspective of the IRS and the state, even if the care is provided in only one of the homes. As such, each family obtains its own Federal and state tax ids; each family tracks the nanny’s hours, wages and taxes separately; each family pays the nanny separately for the hours s/he worked for that family; and each family withholds and deposits taxes with the IRS and the state related to the wages that family paid the nanny.
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You report your household employment taxes on Schedule H of your personal tax return. You also report the amount of estimated tax deposits you’ve made throughout the year. These amounts should be approximately the same.
While household employment taxes are not deductible on your personal income tax return, there are a couple tax breaks you may benefit from:
Dependent Care Account: Your employer may offer a flex spending account for purposes of setting aside pre-tax dollars to help pay for dependent care expenses. The money you save on this income not being taxed can offset your household employment tax liabilities. Check with your company’s HR department to learn about your enrollment options and to find out what documentation you need in order to claim reimbursement for dependent care expenses.
Child Care Tax Credit: If you don’t have access to a Dependent Care Account, you can claim the Tax Credit for Child or Dependent Care on your personal federal income tax return at year-end.
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You, the employer, are responsible for paying your employee. The paystub you generate in my system will tell you the net amount to pay. You can pay via check, cash app (e.g. PayPal), or bank transfer.
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Most paid time off benefits (personal days, vacation) are optional, but you must offer paid sick leave. The state requires that all hourly employees, regardless of the number of hours they work, must earn - or be granted - the equilvalent of 1 hour of paid sick leave for every 40 hours worked. E.g. if you expect your employee will work 2000 hours per year, s/he must earn or be granted 50 hours of paid sick leave.
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