More than one public figure has been tripped up on household employment. If you are paying individuals to perform tasks in or around your house, please be aware of the following, and if you have any questions, please call us.
When Does an Individual Qualify as an Employee? A 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 doesn’t 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 doesn’t matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
Some examples of workers who do household work are:
- Health aides
- House cleaning workers
- Private nurses
- Yard workers
If the worker can control how the work is done, the worker isn’t 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.
Determining Legal Status to Work. The law is clear – it is unlawful for you knowingly to hire or continue to employ an individual who can’t legally work in the United States.
When you hire a household employee to work for you on a regular basis, you and the employee must complete the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. No later than the first day of work, the employee must complete the employee section of the form by providing certain required information and attesting to his or her current work eligibility status in the United States. You must complete the employer section by examining documents presented by the employee as evidence of his or her identity and employment eligibility. Acceptable documents to establish identity and employment eligibility are listed on Form I-9. You should keep the completed Form I-9 in your own records. Don’t submit it to the IRS, the USCIS, or any government or other entity. The form must be available for review upon notice by an authorized U.S. Government official.
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, pay federal unemployment tax, or both.
You do not need to withhold federal income tax from your household employee’s wages. However, if your employee asks you to withhold it, you can.
If you pay cash wages of $2,000 or more in 2017 to any one household employee, withhold and pay social security and Medicare taxes. Taxes are 15.3% of cash wages; your employee’s share is 7.65% and your share is 7.65%. Do not count wages you pay to your spouse, a child under 21, your parents (there are some exceptions to this) and any employee under the age of 18 at any time in 2017. If you paid total cash wages of $1,000 or more, you must also pay federal unemployment tax of 6% of up to $7,000 of cash wages.
In some instances, you may have to pay state unemployment taxes for your household employee and may be required to carry workers’ compensation insurance. You should review your state unemployment tax agency’s website for further information.
If you have a household employee and you are required to withhold and pay employment taxes and you don’t, you will generally be liable for the employment taxes that you should have paid. Interest and penalties could apply.
What Records You Must Keep. Keep your copies of Schedule H or other employment tax forms you file and related Forms W-2, W-3 and W-4. You must also keep records to support the information you enter on the forms you file. If you must file Form W-2, you will need to keep a record of your employee’s name, address and SSN.
Can You Claim a Credit for Child and Dependent Care Expenses? If your household employee cares for your dependent who is under age 13 or for your spouse or dependent who isn’t capable of self-care, you may be able to take an income tax credit against some of your expenses. To qualify, you must pay these expenses so you can work or look for work. If you can take the credit, you can include in your qualifying expenses your share of the federal and state employment taxes you pay, as well as the employee’s wages.