Authored By: Jessica Haddock, Salt Lake City Office
Recently I have had many who have wondered if they are a household employer so I thought this might be a good topic to address in a blog post. How do you know if you are considered a household employer and if the worker is considered your employee? An easy way to determine whether or not you are considered a household employer is if the employee is working in or around your home and under your control and if he/she follows your instructions by way of what work is done and how it is done, and you provide any tools or items needed to complete the job. Any worker who does the job in their own way and uses their own tools and also provides their services through their own separate business would not be your employee.
An example of types of jobs that could be considered household work would be:
• Babysitters and Nannies
• Caretakers, Health Aids and Private nurses
• House cleaning workers/Housekeepers/Maids/Yard Workers
• Domestic workers
Please be advised that if the person doing the work has their own company and offers their services to the public and brings their own tools would not be considered your employee. For example, if you hire a person to come in and clean your house and that person owns their own business and also gives those services to others and they bring their own supplies/tools they would not be considered your employee.
Another example would be if you have someone who performs child care for you out of their own home or child care service and they have their own supplies that would not be considered a household employee. If that person takes care of your child in your home under your instructions on the duties included in caring for this child and you provide the items needed to provide these services this person would be considered your household employee.
If you determined that you have a household employee you will need to collect the required forms from the employee to keep on file. First you and the employee will need to complete the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. You will need to keep the complete form in your records as this provides proof of your employee’s work eligibility status in the United States as it is illegal to hire and employ anyone who cannot legally work in the United States.
You will then need to determine whether or not you will need to pay employment taxes on your employee. If you pay wages of $1,800 or more in 2013 to any one household employee or pay wages of $1,000 or more in any calendar quarter for 2012 or 2013 to the household employee you will be required to pay employment taxes. You do not have to count wages you pay to your spouse, your child under the age of 21, any employee under the age of 18 at any time in 2013 (unless this is considered their principal occupation) and you also do not count wages paid to your parents. There is an exception also to the wages paid to parents where you will need to count the wages paid to your parent if both of the following conditions apply:
• Your parent cares for your child who is either of the following:
o Under the age of 18, or
o Has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in each calendar quarter services were performed.
• Your marital status is one of the following:
o You are divorced and have not remarried,
o You are a widow or widower, or
o You are living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in each calendar quarter services were performed.
The taxes that are required to be paid on household employees are Social Security, Medicare, Federal Unemployment Tax (FUTA) and you may also owe State Unemployment Tax (SUTA). You will need to collect a W-4 from your employee and determine if the employee would like to withhold any federal withholding. You are not required to withhold any federal or State withholding if they employee does not want to. The Social Security Tax is 6.2% each for both the employee and employer and the Medicare tax is 1.45% (subject to certain income limitations) each for both the employee and employer totaling 15.3% for both employee and employer portions of FICA (Social Security and Medicare). You will also owe a small amount towards your Federal Unemployment Tax and State Unemployment tax. You can either chose to withhold the employee’s portion of the taxes from their pay or you can chose to pay those for the employee with the employers portion that you are required to pay for your employee, either way the taxes will be your responsibility to report and pay. Any tax you pay for your employer without withholding it from the employee’s wages must be included in the employee’s wages for federal income tax purposes and also must be included in the Social Security, Medicare and Federal Unemployment wages as well.
Unlike regular payroll taxes the federal portion of the taxes are not reported on the same forms and are not reported quarterly. As a household employer you will pay and report the taxes on Schedule H included with your Form 1040. Your state withholding, if you have any, and your State Unemployment Tax could be either on a quarterly or annual filing period and also get reported on their own separate forms not on your Schedule H.
You will want to keep records of all your payroll items for your household employee as you will be required to pay and record all such items on your Schedule H at the end of the year and also provide your employee with a W-2. Since you will be providing your employee with a W-2 and having to file the required employment tax forms you will also want to receive an Employer Identification Number (EIN) as the household employer instead of using your own social security number.
More details about household employers can be found in IRS Publication 926. Please feel free to call any of our payroll specialists at either our Salt Lake City or Logan offices.