As a household employer, you have particular responsibilities. Here is how the IRS defines this work arrangement:“ You have a household employee if you hired someone to do household work and that worker is your employee.”
Easy enough, right? Well, not really. There are a variety of details that govern this type of relationship. Here are some points to consider:
A worker is your employee if you have the ability to control what work is completed, as well as how it is done.
If a person meets the requirements of being an employee, they can work as either a part-time or full-time employee.
You have the ability to pay an employee by the job, weekly, daily, hourly, or through another type of arrangement (such as twice per month).
There are also times when a worker is not considered an employee. This is the case if the worker controls how the work is done. In this case, the person is considered a self-employed contractor.
Examples of Household Workers
There are many types of household workers, with some of the most common including:
Note: it is possible that you have more than one household employee.
Tax Obligations of a Household Employer
For 2015, if you pay cash wages of $2,000 or more to any household employee, you are required to withhold 1.45% of Medicare taxes and 6.2% of Social Security. You are also required to pay the employer portion of both, which equals 7.65%.
You are not obligated by law to withhold federal income tax. If you agree to do so, such as at the request of your employee, you must obtain Form W-4 from the employee.
If you are required to withhold Medicare and Social Security taxes, you must obtain Form W-2 from your employee.
When it comes to the question of whether or not you are a household employer, it is better to be safe than sorry. Failing to pay taxes and follow the regulations outlined by the IRS could lead to serious and costly penalties. Consult with your tax professional to determine your status.