Correctly calculating and filing household employee payroll taxes protects you from liability and gives you access to tax breaks. But determining who is and isn't a household employee (and who you have to pay taxes on) can be complicated. In this manual, we cover the basics of what you need to know about payroll tax forms and deadlines for home employers.
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Who counts as a household employee?
Some examples of potential domestic employees include housekeepers, maids, nannies, and gardeners, but you should also consider how often you hire them and how much you pay them. Generally speaking, domestic workers count as employees if you control both the work they do and how they do it for a substantial portion of their time.
For example, hiring a babysitter once a month to watch your child during a date night usually doesn't count as a household employee because you pay them so infrequently. However, a nanny who lives on her property and cares for her children at least five days a week will be considered a domestic employee.
Business owners who provide their services, such as plumbers, carpenters, and HVAC technicians, are generally not considered domestic employees because there is no control over how they complete the work. Instead, they are considered independent contractors.
Who pays household employer taxes?
Household employee taxes, sometimes called nanny taxes, are federal and state taxes owed on wages paid to household employees. You will owe these taxes if you paid any household employee more than $2,600 in cash wages in 2023. The minimum will increase slightly in 2024 to $2,700 in cash wages.
The main taxes are Social Security, Medicare, and federal unemployment taxes (FUTA). A portion of these taxes is paid by employers and the rest is deducted from employees' salaries. Here is a helpful chart summarizing the tax rates:
| Tax | employer portion | Portion of household employees |
|---|---|---|
| Social Security | 6.2% | 6.2% |
| State health insurance | 1.45% | 1.45% |
| futa | Varies (0.6%-6.0%) | N/A |
As you can see, only the employer pays the FUTA tax. If he is required to pay state unemployment taxes where he lives, then he can receive a credit of up to 5.4% on his federal unemployment taxes, which is why that number varies. For more information, see our guides explaining how to calculate payroll taxes and when payroll taxes are due.
| Using payroll software like SurePayroll makes it easy to calculate and automatically file all necessary taxes so you don't have to worry about meeting requirements. |
Common Payroll Tax Forms for Home Employers
Form 1040-ES
Form 1040-ES is used to file estimated taxes with the IRS throughout the year. Estimated taxes are due quarterly, meaning four times a year. The expiration dates in 2024 are:
- April 15, 2024
- June 15, 2024
- September 15, 2024
- January 15, 2025
For 2023, the deadlines were:
- April 18, 2023
- June 15, 2023
- September 15, 2023
- January 16, 2024
Under IRS rules, household employers are not required to withhold the employee's portion of federal taxes from their employees' wages if they fall below that $2,600 annual limit, but some household employers below that limit may be required to ask your employer to withhold taxes anyway.
Form W-2
If you withhold taxes on behalf of your household employee, you will almost certainly be required to file a W-2 on their behalf. A W-2 form contains information that employees use to file their personal tax returns. A W-2 form shows what wages were paid to an employee during a calendar year and what federal, state, and local taxes were withheld from their paycheck. The W-2 form will also include relevant fringe benefits, such as health insurance and retirement account contributions.
A W-2 form must be submitted for each employee who received more than $600 in pay during the calendar year. If your household worker is classified as a self-employed worker, independent contractor, or non-employee, you will send them a 1099 form. All W-2 forms must be completed and submitted by January 31 of the following calendar year, so W-2 forms -2 for 2023 must be filed by January 31, 2024. For more information, see our guide to W-2 forms.
Form W-3
Form W-3 is also called “Transmittal of Wage and Tax Returns.” Any employer who files a W-2 must also file a W-3. Form W-3 is used to summarize W-2 information for all of your employees. The IRS uses Form W-3 to compare employees' personal tax returns and make sure the figures reported are accurate. Like W-2 forms, all W-3 forms must be completed and filed no later than January 31 of the following calendar year.
Schedule H (Form 1040)
Schedule H is a tax form used to report household employment taxes if you paid cash wages to a household employee and the wages were subject to Social Security, Medicare, or FUTA taxes, or if you withheld federal taxes. about income.
You must include Schedule H as part of your tax return if you paid a single employee at least $2,600 in tax year 2023 or if the cash wages of all household employees totaled $1,000 or more during any three-month calendar quarter. during the current or previous year. fiscal year. You must file Schedule H if you withheld federal income tax at the request of an employee, even if their wages fell below the limit we just mentioned.
Importance of compliance with payroll tax regulations
Properly calculating and reporting household employer taxes is of utmost importance. Underpaying domestic employee taxes often results in a substantial penalty at both the federal and state government levels. Incorrectly calculating or filing household employer taxes can also expose you to an audit, which is a costly and time-consuming process.
Properly setting up your household employees also allows you to take advantage of tax credits and exemptions, such as the Dependent Care Flexible Spending Account (FSA) or the Federal Child and Dependent Care Tax Credit that can help cover some of the expenses. .
If you already have household employees or plan to hire one, we strongly recommend that you seek advice from a certified public accountant or other expert familiar with household employee taxes. They will help you set everything up correctly and make sure you get all the tax breaks possible. We also recommend looking for a nanny payroll service that makes it easy to calculate and file all necessary taxes for household employees.
