It seems like the IRS wants their piece of everything, and your household employees are no exception. If you have a housekeeper, babysitter or gardener, you’ll want to read on to make sure you don’t get hit with an IRS notice for unpaid taxes and penalties.
First, who is considered a “household employee”? This is an individual that you pay to provide a domestic service at your home. Nannies/babysitters, housekeepers, private nurses, drivers and sometimes gardeners are examples of household employees. In addition to providing the service at your home, you must also have control over the work that is performed. That means you direct when and what they do and supply any equipment that is needed. If you provide the lawnmower and other tools for your gardener and they don’t offer the same service for others, they are probably a household employee.
So, you have a household employee, now what? The next step is to determine if reporting is required. If you pay less than $2,700 to any individual, great! You don’t need to read any further.
But, if you pay more than $2,700 during the year to an individual household employee, then you owe what is commonly called the “Nanny Tax”:
- You must withhold Social Security and Medicare taxes from the employee wages, and
- Pay the employer share of Social Security and Medicare taxes (federal income taxes are not required to be withheld unless the employee asks), and
- Pay Federal unemployment taxes
- In some states, state withholding and state unemployment taxes are also required.
If you’re still reading, and now you’re wondering how to report your Household Employee taxes, Teuscher Walpole can help. Just give us a call at 801-619-1400!
