Do you know if you have a household employee?

March 25, 2011

If you pay for household help, you may be liable for the “nanny tax,” even if your employee is not a nanny, per se. The nanny tax refers to three federal employment taxes that household employers may have to pay for their domestic workers–Social Security, Medicare, and unemployment taxes. If you hire someone to work in or around your home, you’ll need to know what federal income tax issues (if any) apply, and what forms may be required. Although you may have to withhold and pay federal employment taxes in certain cases, you won’t have to withhold federal income tax from your household employees’ wages (unless you choose to do so).

In addition to federal employment taxes, you may be required to pay state unemployment and disability taxes and/or carry workers’ compensation insurance. Because state tax requirements may differ from federal, you should check with the appropriate agency in your state for further information.

If you have a household employee, you may need to do the following:

• Withhold and/or pay Social Security and Medicare taxes
• Pay federal unemployment tax
• Pay state unemployment tax and comply with other state requirements
• File appropriate federal and state tax reporting forms
• Comply with federal labor laws

You aren’t required to withhold federal income tax from your household employee’s wages. If your employee asks you to withhold it, however, you may choose to do so.

For more information about household employers, see IRS Publication 926 (Household Employer’s Tax Guide).We can help guide you the through the maze of employment taxes and registrations and process your payroll through RedWolf Payroll.

Donna Bordeaux, CPA with Calculated Moves

Creativity and CPAs don’t generally go together.  Most people think of CPAs as nerdy accountants who can’t talk with people.  Well, it’s time to break that stereotype.  Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux.  They have over 50 years of combined experience as entrepreneurial CPAs.  They’ve owned businesses and helped business owners exceed their wildest dreams.   They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.