To Do or Not to Do: Paying Your Household Employee Under the Table
Hiring a household employee sounds easy enough: you advertise the position, interview candidates, and make a final selection based on your findings.
While this is the basic approach to hiring a household employee, you’re overlooking a part of the process equally as important as finding the right person for the job: the financial side of becoming a household employer.
There are many details that deserve your attention, not least of which are your legal obligations regarding household employer taxes.
But you may be facing the temptation to pay your employee under the table, and wondering what the risks and implications of that decision might be.
Does Your Employee Want Cash?
Through the interview and hiring process, you might assume that you and your potential employee are on the same page with regard to how you will pay them. But that might not be the case.
Many household employees would prefer to be paid cash under the table, as a means of getting out of documenting income and paying associated income taxes. In addition to this posing legal risks to both the employer and employee, paying someone under the table means:
The person does not earn Social Security credits, as their income is not reported
The person does not have access to the unemployment system should they lose their job
But What About You?
Even if your household employee is asking to be paid in cash, you don’t want to go down this path.
You’re required by law to pay employer taxes and ensure that payroll taxes are processed and filed each pay period per your federal, state, and local requirements.
Here’s something else to think about: if you pay your employee cash and the relationship turns sour, he or she could file a claim with the Department of Labor. If this happens, you could find yourself in deep legal trouble – and that’s not a place you want to be.
As tempting as it may be for you to pay your household employee under the table, you need to resist the urge. This can negatively impact both you and your employee, so there’s never a good time to take this risk.
If the thought of managing payroll by the books is already giving you a headache, take a breath. Doing things the right way doesn’t have to mean doing things on your own. By consulting with a payroll service, you can shift the tax calculation, payment, and filing piece of payroll to the service provider and rely on them to handle the most complex elements of payroll on your behalf.
This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.