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I Own a Business: Can I put my Household Employee on my Payroll?

As a business owner, you have a lot on your plate. This includes paying employees in full and on time.

To keep up at home, some business owners hire a household employee. This could be anybody from a nanny to take care of their children to a cleaning lady to keep their home sparkling.

Since you have to pay your business employees, as well as your household employee, it only makes sense to simplify the process. For this reason, some people consider adding a household employee to their business payroll. This is a mistake.

It may be the easy and convenient thing to do, but it is also illegal in most cases. Doing so could result in trouble on many fronts, including with your business.

Keep the Two Separate

Separating your business employees from your household employee will definitely mean more paperwork, more taxes, and generally more confusion. However, this is what the IRS wants you to do.

First things first, make sure you have two separate Employer Identification Numbers (EIN). This will allow you to keep the two "employers" separate, ensuring that you never mix the two.

It is likely you have a good beat on what is expected of your business in terms of paying taxes. You need to get to this same point with your household employee. How much money should you withhold from each paycheck? Are you staying current with your portion of FICA tax? How about any unemployment tax?

Here is the easiest way to put it: you should never mix your business responsibilities with those as a household employer. These should always be considered two separate entities.

If you blur the lines, if you decide to put a household employee on your business payroll, it could result in an IRS penalty among other concerns.