If you have a household employee, you may need to pay state and federal employment taxes. Which forms do
you need to file for your household employees? Is your maid, housekeeper, or babysitter covered by the
rules? This Financial Guide provides the answers to these and other questions.
This Financial Guide will help you decide whether you have a "household employee," as defined by the IRS
and if you do, whether you need to pay federal employment taxes. It explains the rules for determining,
paying, and reporting Social Security tax, Medicare tax, federal unemployment tax, federal income tax
withholding, and state unemployment tax for your household employee. It also explains what records you need
to keep. In addition, it provides you with the information you need to find out whether you need to pay
state unemployment tax for your household employee.
While many people disregard the need to pay taxes on household employees, they do so at the risk of stiff
tax penalties. As you will see below, these rules are quite complex and professional tax guidance is highly
recommended.
A basic familiarity with these rules will make it easier to work with your tax advisor, saving you time,
reducing tax costs, and avoiding tax penalties and interest charges.
Who is a Household Employee?
The "nanny tax" rules apply to you only if (1) you pay someone for household work and (2) that
worker is your employee.
-
A household employee is someone who does work in or around your home. Examples of household employees
include babysitters, nannies, health aides, private nurses, maids, caretakers, yard workers, and similar
domestic workers.
-
A household worker is your employee if you can control not only what work is done, but how it is
done. If the worker is your employee, it does not matter whether the work is full-time or part-time, or
that you hired the worker through an agency or from a list provided by an agency or association. It also
does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
On
the other hand, if only the worker can control how the work is done, the worker is not your employee but
is self-employed. A self-employed worker usually provides his or her own tools and offers services to the
general public in an independent business. If an agency provides the worker and controls what work is done
and how it is done, the worker is not your employee.
Example: You pay Betty to babysit your child and do light housework four days a week in your home.
Betty follows your specific instructions about household and childcare duties. You provide the household
equipment and supplies that Betty needs to do her work. Betty is your household employee.
Example: You pay John to care for your lawn. John also offers lawn care services to other
homeowners in your neighborhood. He provides his own tools and supplies, and he hires and pays any helpers
he needs. Neither John nor his helpers are your household employees.
How Do You Verify That an Employee Can Legally Work in the United States?
It is unlawful for you to knowingly hire or continue to employ a person who cannot legally work in the
United States.
When you hire a household employee to work for you on a regular basis, he or she must complete USCIS Form
I-9 Employment Eligibility Verification. It is your responsibility to verify that the employee is either a
U.S. citizen or an alien who can legally work and then complete the employer part of the form. Keep
the completed form for your records. Do not return the form to the U.S. Citizenship and Immigration Services
(USCIS).
Two copies of Form I-9 are contained in the UCIS Employer Handbook. Visit the USCIS website or call 800-767-1833 to order
the handbook, additional copies of the form, or to get more information.
Do You Need to Pay Employment Taxes?
If you have a household employee, you may need to withhold and pay Social Security and Medicare taxes, or
you may need to pay federal unemployment tax, or you may need to do both. To find out, read the table
below.
If you:
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Then you need to:
|
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Pay cash wages of $2,100 or more in 2019 to any one household employee.
Do not count wages you pay to:
- Your spouse,
- Your child under age 21,
- Your parent, or
- Any employee under age 18 during 6
|
Withhold and pay Social Security and Medicare taxes.
- The combined taxes are generally 15.3% of cash wages.
- Your employee's share is 7.65%.
(You can choose to pay the employee's share yourself and not withhold it.)
|
|
Pay total cash wages of $1,000 or more in any calendar quarter of 2018 or 2019 to household employees.
Do not count wages you pay to:
- Your spouse,
- Your child under age 21, or
- Your parent.
|
Pay federal unemployment tax.
- The tax is 6.0% of cash wages.
- Wages over $7,000 a year per employee are not taxed.
- You also may owe state unemployment tax.
|
Note: If neither of these two columns applies, then you do not need to pay any federal
unemployment taxes. However, you may still need to pay state unemployment taxes.
You do not need to withhold federal income tax from your household employee's wages. But if your employee
asks you to withhold it, you can choose to do so.
Tip: If your household employee cares for your dependent under the age of 13 or your spouse or
dependent who is not capable of self-care, so that you can work, you may be able to take an income tax
credit of up to 35% (or $1,050) of your expenses for each qualifying dependent. For two or more qualifying
dependents, you can claim up to 35% (or $2,100). For higher income earners the credit percentage is
reduced, but not below 20%, regardless of the amount of AGI. If you can take the credit, then you can
include your share of the federal and state employment taxes you pay, as well as the employee's wages, in
your qualifying expenses.
State Unemployment Taxes
To find out whether you need to pay state unemployment tax for your household employee contact your state
unemployment tax agency. You'll also need to determine whether you need to pay or collect other state
employment taxes or carry workers' compensation insurance.
Note: If you do not need to pay Social Security, Medicare, or federal unemployment tax and do not
choose to withhold federal income tax, the rest of this publication does not apply to you.
Social Security and Medicare Taxes
Note: Additional Medicare Tax. As of January 1, 2013, employers are responsible for
withholding the 0.9% Additional Medicare Tax on an individual's wages paid in excess of $200,000 in a
calendar year. An employer is required to begin withholding Additional Medicare Tax in the pay period in
which it pays wages in excess of $200,000 to an employee. There is no employer match for Additional
Medicare Tax.
Both you and your household employee may owe social security and Medicare taxes. Your share is 7.65% (6.2%
for social security tax and 1.45% for Medicare tax) of the employee's social security and Medicare wages.
Your employee's share is 6.2% for social security tax and 1.45% for Medicare tax for wages below the
Additional Medicare Tax threshold (see above).
You are responsible for payment of your employee's share of the taxes as well as your own. You can either
withhold your employee's share from the employee's wages or pay it from your own funds.
Social Security and Medicare Wages
You figure Social Security and Medicare taxes on the Social Security and Medicare wages you pay your
employee. If you pay your household employee cash wages of $2,100 or more in 2019, all cash wages you pay to
that employee in 2019 (regardless of when the wages were earned) up to $132,900 are social security wages
and all cash wages are Medicare wages. However, any non-cash wages (food, lodging, clothing, and other
non-cash items) you pay do not count as social security and Medicare wages. If you pay the employee less
than $2,100 in cash wages in 2019, none of the wages you pay the employee are Social Security and Medicare
wages, and neither you nor your employee will owe Social Security or Medicare tax.
Wages Not Counted
Do not count wages you pay to any of the following individuals as Social Security and Medicare wages:
- Your spouse.
- Your child who is under age 21.
- Your parent.
Note: However, you should count wages to your parent if both of the following apply: (a) your
child lives with you and is either under age 18 or has a physical or mental condition that requires the
personal care of an adult for at least four continuous weeks in a calendar quarter, and (b) you are
divorced and have not remarried, or you are a widow or widower, or you are married to and living with a
person whose physical or mental condition prevents him or her from caring for your child for at least
four (4) continuous weeks in a calendar quarter.
- An employee who is under age 18 at any time during the year.
Note: However, you should count these wages to an employee under 18 if providing household
services is the employee's principal occupation. If the employee is a student, providing household
services is not considered to be his or her principal occupation.
Also, if your employee's Social Security and Medicare wages reach $132,900 in 2019, do not count any wages
you pay that employee during the rest of the year as Social Security wages to figure Social Security tax
(but continue to count the employee's cash wages as Medicare wages to figure Medicare tax).
You figure federal income tax withholding on both cash and non-cash wages (based on their value). However,
do not count as wages any of the following items:
- Meals provided at your home for your convenience.
- Lodging provided at your home for your convenience and as a condition of employment.
-
$265 a month in 2019 ($260 in 2018) for transit passes that you give your employee or, in some cases,
for cash reimbursement you make for the amount your employee pays to commute to your home by public
transit. A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person
to ride on mass transit, such as a bus or train.
-
Up to $265 a month in 2019 ($260 in 2018) to reimburse your employee for the cost of parking at or near
your home or at or near a location from which your employee commutes to your home.
Withholding the Employee's Share
You should withhold the employee's share of Social Security and Medicare taxes if you expect to pay your
household employee Social Security and Medicare wages of $2,100 or more in 2019. However, if you prefer to
pay the employee's share yourself; see "Not Withholding the Employee's Share" in the next section.
You may withhold the employee's share of the taxes even if you are not sure your employee's Social Security
and Medicare wages will be $2,100 or more in 2019. If you withhold the taxes but then actually pay the
employee less than $2,100 in Social Security and Medicare wages for the year, you should repay the
employee.
You pay withheld taxes as part of your regular income tax obligation. You don't deposit them periodically
subject to an exception for business owners. See "Payment Options for Business Employers" below.
Withhold 7.65% (6.2% for Social Security tax and 1.45% for Medicare tax) from each payment of Social
Security and Medicare wages. Wages exceeding the $200,000 (single filer) threshold amount are subject to the
additional Medicare tax or 0.9%. Instead of paying this amount to your employee, you will pay it to the IRS
7.65% for your share of the taxes. Do not withhold any social security tax after your employee's social
security wages for the year reach $132,900 in 2019 ($128,400 in 2018).
If you make an error by withholding too little, you should withhold additional taxes from a later payment.
If you withhold too much, you should repay the employee.
Example: You hire a household employee (who is an unrelated individual over age 18) to care for
your child and agree to pay cash wages of $100 every Friday. You expect to pay your employee $2,100 or
more for the year. You should withhold $7.65 from each $100 wage payment and pay your employee the
remaining $92.35. The $7.65 is the sum of $6.20 ($100 x 6.2%) for your employee's share of Social Security
tax and $1.45 ($100 x 1.45%) for your employee's share of Medicare tax (for wages under $200,000 for
single filers). You will pay $7.65 you withhold with $7.65 from your own funds when you pay the taxes.
Not Withholding the Employee's Share
If you prefer to pay your employee's Social Security and Medicare taxes from your own funds, you do not
have to withhold them from your employee's wages. The Social Security and Medicare taxes you pay to cover
your employee's share must be included in the employee's wages for income tax purposes. However, they are
not counted as Social Security and Medicare wages or as federal unemployment (FUTA) wages.
Example: You hire a household employee (who is an unrelated individual over age 18) to care for
your child and agree to pay cash wages of $100 every Friday. You expect to pay your employee $2,100 or
more for the year. You decide to pay your employee's share of Social Security and Medicare taxes from your
own funds. You pay your employee $100 every Friday without withholding any Social Security or Medicare
taxes. For each wage payment, you will pay $15.30 when you pay the taxes. This is $7.65 ($6.20 for Social
Security tax plus $1.45 for Medicare tax) to cover your employee's share plus the $7.65 for your share.
For income tax purposes, your employee's wages each payday are $107.65 ($100 plus the $7.65 that you will
pay to cover your employee's share of Social Security and Medicare taxes).
Federal Unemployment (FUTA) Tax
The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax
Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Like most employers, you may
owe both the federal unemployment tax (the FUTA tax) and a state unemployment tax. Or, you may owe only the
FUTA tax or only the state unemployment tax. To find out whether you will owe state unemployment tax,
contact your state's unemployment tax agency. See the list of state unemployment agencies at the end of this
Guide for the address.
The FUTA tax is 6.0% of your employee's FUTA wages. However, you may be able to take a credit of up to 5.4%
against the FUTA tax, resulting in a net tax rate of 0.6%. Your credit for 2019 is limited unless you pay
all the required contributions for 2019 to your state unemployment fund by April 15, 2020. The credit you
can take for any contributions for 2019 that you pay after April 15, 2020, is limited to 90% of the credit
that would have been allowable if the contributions were paid by April 15, 2020.
WARNING: Do not withhold the FUTA tax from your employee's wages. You must pay it from your own
funds.
You figure the FUTA tax on the FUTA wages you pay. If you pay cash wages to all of your household employees
totaling $1,000 or more in any calendar quarter of 2018 or 2019, the first $7,000 of cash wages you pay to
each household employee in 2019 is FUTA wages. (A calendar quarter is January through March, April through
June, July through September, or October through December.) If your employee's cash wages reach $7,000
during the year, do not figure the FUTA tax on any wages you pay that employee during the rest of the year.
For a discussion of "cash wages," see the section on Social Security Wages, above.
If you pay less than $1,000 cash wages in each calendar quarter of 2019, but you had a household employee
in 2018, the cash wages you pay in 2019 may still be FUTA wages. They are FUTA wages if the cash wages you
paid to household employees in any calendar quarter of 2018 totaled $1,000 or more.
Do not count wages you pay to any of the following individuals as FUTA wages:
- Your spouse.
- Your child who is under age 21.
- Your parent.
Example: You hire a household employee (not related to you) on January 1, 2019, and agree to pay
cash wages of $200 every Friday. During January, February, and March, you pay the employee cash wages of
$2,600. Because you pay cash wages of $1,000 or more in a calendar quarter of 2019, the first $7,000 of
cash wages you pay the employee (or any other employee) in 2019 or 2018 is FUTA wages. The FUTA wages you
pay may also be subject to your state's unemployment tax.
During 2019, you pay your household employee cash wages of $10,400. You pay all the required
contributions for 2019 to your state unemployment fund by April 15, 2020. Your FUTA tax for 2019 is $42
($7,000 x 0.6%).
Do You Need to Withhold Federal Income Tax?
You are not required to withhold federal income tax from wages you pay a household employee. You should
withhold federal income tax only if your household employee asks you to withhold it and you agree. The
employee must give you a completed Form W-4, Employee's Withholding Allowance Certificate.
If you agree to withhold federal income tax, you are responsible for paying it to the IRS.
Wages
You figure federal income tax withholding on both cash and non-cash wages you pay. Measure wages you pay in
any form other than cash by the value of the non-cash item.
Do not count as wages any of the following items:
- Meals provided at your home for your convenience.
- Lodging provided at your home for your convenience and as a condition of employment.
-
Up to $265 a month in 2019 for bus or train tokens (passes) you give your employee, or for any cash
reimbursement you make for the amount your employee pays to commute to your home by public transit.
-
Up to $265 a month in 2019 for the value of parking you provide your employee at or near your home or at
or near a location from which your employee commutes to your home.
Paying Tax without Withholding
Any income tax you pay for your employee without withholding it from the employee's wages must be included
in the employee's wages for federal income tax purposes. It is also counted as Social Security and Medicare
wages and as federal unemployment (FUTA) wages.
How Do You Handle the Earned Income Credit (EIC)?
Certain workers can take the earned income tax credit (EIC) on their federal income tax return. This credit
reduces their tax or allows them to receive a payment from the IRS if they do not owe tax. You may have to
make advance payments of part of your household employee's EIC along with the employee's wages. You also may
have to give your employee a notice about the EIC.
Notice about the EIC
The employee's copy (Copy B) of IRS 2019 Form W-2, Wage and Tax Statement has a statement about the EIC on
the back.
Tip: If you give your employee that copy by January 31, 2020 (as discussed under Form W-2), you do
not have to give the employee any other notice about the EIC.
Otherwise, you must give your household employee a notice about the EIC only if you agree to withhold
federal income tax from the employee's wages but the income tax withholding tables show that no tax should
be withheld. Even if not required, you are encouraged to give the employee a notice about the EIC if his or
her 2019 wages are less than $55,592.
If you do not give your employee Copy B of the IRS Form W-2, your notice about the EIC can be any of the
following:
-
A substitute Form W-2 with the same EIC information on the back of the employee's copy that is on Copy C
of the IRS Form W-2,
- Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or
- Your own written statement with the same wording as Notice 797.
If you give your employee a substitute Form W-2 on time which lacks the required EIC information, you must
give notice about the 6IC to the employee within one week of the date you gave him or her the substitute
Form W-2. If Form W-2 is required, but not given on time, you must give the employee notice about 2020 EIC
by January 31, 2020. If Form W-2 is not required, you must give your notice to the employee by February 7,
2020.
How do You Make Tax Payments?
When you file your 2019 federal income tax return in 2020, attach Schedule H, Household Employment Taxes.
Use this Schedule, discussed further below, to figure your household employment taxes. You will add the
federal employment taxes on the wages you pay to your household employee in 2019, less any advance earned
income credit payments you make to the employee, to your income tax. The amount you owe with your return is
due to the IRS by April 15, 2020.
Tip: You can avoid owing tax with your return if you pay enough federal income tax before you file
to cover the employment taxes for your household employee, as well as your income tax. If you are
employed, you can ask your employer to withhold more federal income tax from your wages in 2019. If you
get a pension or annuity, you can ask for more federal income tax withholding from your benefits. Or you
can make estimated tax payments for 2019 to the IRS, or increase your payments if you already make them.
Asking for More Federal Income Tax Withholding
If you are employed and want more federal income tax withheld from your wages to cover the employment taxes
for your household employee, give your employer a new Form W-4, Employee's Withholding Allowance
Certificate. Complete it as before, but show the additional amount that you want withheld from each paycheck
on line 6.
If you get a pension or annuity and want more federal income tax withheld to cover the employment taxes for
your household employee, give the payer a new Form W-4P, Withholding Certificate for Pension or Annuity
Payments (or a similar form provided by the payer). Complete it as before, but show the additional amount
that you want withheld from each benefit payment on line 3.
Paying Estimated Tax
If you want to make estimated tax payments to cover the employment taxes for your household employee, get
Form 1040-ES, Estimated Tax for Individuals. Use its payment vouchers to make your payments. You can pay all
of the employment taxes at once or in installments. If you have already made estimated tax payments for
2019, you can increase your remaining payments to cover the employment taxes. Estimated tax payments for
2019 are due April 15, June 17, September 16, 2019, and January 15, 2020.
Payment Option for Business Employers
If you own a business as a sole proprietor or your home is on a farm operated for profit, you can choose
either of two ways to pay the 2019 federal employment taxes for your household employee. You can pay them
with your federal income tax as described above, or you can include them with your federal employment tax
deposits or other payments for your business or farm employees.
If you pay the employment taxes for your household employee with business or farm employment taxes, you
must report them with those taxes on Form 941 or Form 943 and on Form 940 (or 940-EZ).
What Forms Must You File?
You must file certain forms to report your household employee's wages and the federal employment taxes for
the employee if you pay the employee:
- Social Security and Medicare wages,
- FUTA wages, or
- Wages from which you withhold federal income tax.
The employment tax forms and instructions you need for 2019 will be sent to you automatically in January
2020 if you reported employment taxes for 2019 on Schedule H (Form 1040), Household Employment Taxes.
Employer Identification Number (EIN)
You must include your employer identification number (EIN) on the forms you file for your household
employee. An EIN is a 9-digit number issued by the IRS and is not the same as a Social Security number.
Tip: You ordinarily will have an EIN if you previously paid taxes for employees, either as a
household employer or in a business you own as a sole proprietor, or if you have a Keogh Plan. If you
already have an EIN, use that number. If you do not have an EIN, get Form SS-4, Application for Employer
Identification Number. The instructions for Form SS-4 explain how you can get an EIN immediately by
telephone or in about four weeks if you apply by mail.
Form W-2
A separate 2019 Form W-2, Wage and Tax Statement, must be filed for each household employee to whom you
pay:
- Social Security and Medicare wages of $2,100 or more, or
- Wages from which you withhold federal income tax.
You must complete Form W-2 and give Copies B, C, and 2 to your employee by January 31, 2020, You must send
Copy A of Form W-2 with Form W-3, Transmittal of Wage and Tax Statements, to the Social Security
Administration by January 31, 2020.
Schedule H
Use Schedule H (Form 1040), Household Employment Taxes, to report the federal employment taxes for your
household employee if you pay the employee:
- Social Security and Medicare wages of $2,100 or more in 2019,
- FUTA wages, or
- Wages from which you withhold federal income tax.
File Schedule H with your 2019 federal income tax return by April 15, 2020. If you get an extension to file
your return, the extension will also apply to your Schedule H.
If you are not required to file a 2019 tax return, you must file Schedule H by itself. See the Schedule H
instructions for details.
Business Employment Tax Returns
Do not use Schedule H (Form 1040) if you choose to pay the employment taxes for your household employee
with business or farm employment taxes. Instead, include the Social Security, Medicare, and withheld federal
income taxes for the employee on the Forms 941, Employer's Quarterly Federal Tax Return, that you file for
your business or on Form 943, Employer's Annual Tax Return for Agricultural Employees, that you file for
your farm. Include the FUTA tax for the employee on your Form 940 (or 940-EZ), Employer's Annual Federal
Unemployment (FUTA) Tax Return.
If you report the employment taxes for your household employee on Form 941 or Form 943, file Form W-2 for
the employee with the Forms W-2 and Form W-3 for your business or farm employees.
What Records Must You Keep?
Keep your copies of Schedule H or other employment tax forms you file and related Forms W-2, W-3, W-4, and
W-5. You must also keep records to support the information you enter on the forms you file. If you are
required to file Form W-2, you will need to keep a record of your employee's name, address, and Social
Security number.
Wage and Tax Records
On each payday you should record the date and amounts of:
- Your employee's cash and non-cash wages,
- Any employee Social Security tax you withhold or agree to pay for your employee,
- Any employee Medicare tax you withhold or agree to pay for your employee,
- Any federal income tax you withhold,
- Any advance EIC payments you make, and
- Any state employment taxes you withhold.
Employee's Social Security Number
You must keep a record of your employee's name and Social Security number exactly as they appear on his or
her Social Security card if you pay the employee:
- Social Security and Medicare wages, or
- Wages from which you withhold federal income tax.
You must ask for your employee's Social Security number no later than the first day on which you pay the
wages. You may wish to ask for it when you hire your employee.
An employee who does not have a Social Security number must apply for one on Form SS-5, Application for a
Social Security Card. An employee who has lost his or her Social Security card or whose name is not
correctly shown on the card should apply for a new card. Employees may get Form SS-5 from any Social
Security Administration office or by calling l-800-772-1213.
How Long To Keep Records
Keep your employment tax records for at least four years after the due date of the return on which you
report the taxes or the date the taxes were paid, whichever is later.
State Unemployment Tax Agency of Florida
Unemployment Compensation Services
Agency for Workforce Innovation
107 E. Madison Street
Caldwell Building
Tallahassee, FL 32399-4120
(850) 245-7105
Household Employers Checklist
You may need to do the following things when you have a household employee: 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.
- Make advance payments of the earned income credit.
- Decide how you will make tax payments.
- Keep records.
By January 31, 2019:
- Get an employer identification number, if needed.
- Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement.
By January 31, 2019:
- Send Copy A of Form W-2 to the Social Security Administration.
By April 15, 2019:
- File Schedule H (Form 1040), Household Employment Taxes, with your tax return.
