Do you have a nanny or babysitter, a cleaning person, a caretaker, a health aide or private nurse? If so, you may have a household employee. Generally, if you control what work is done, when, and how it gets done, the worker is your employee. It doesn’t matter if you pay by the hour or on a by-the-job basis. By having employees you have certain employment tax responsibilities as any employer would have. You will need to pay Social Security and Medicare taxes and federal and state unemployment insurance.
- If you pay cash (paid in the form of money order, check, cash, etc) wages of $2,000 or more to any household employee during the year, you will need to withhold and pay Social Security and Medicare taxes. Your employee’s share is 7.65%, which is either paid by you or withheld from your employees pay, and your share is a matching 7.65%, for a total of 15.3% for Social Security and Medicare taxes. Federal taxes are remitted on Schedule H and paid in with your 1040, state taxes are paid each quarter.
- If you pay cash wages of $1,000 or more in any calendar quarter, you must pay federal and state unemployment taxes. The federal rate is 0.6% of cash wages, but limited to the first $7,000 paid (no more than $42 per employee). State unemployment and withholdings are filed separately each quarter and varies from state to state.
The above rules do not apply to cash wages paid to your spouse, child under 21 years of age, parent, or any employee under 18 years of age. Also, if neither of the bullet points above applies, you do not need to pay any federal employment taxes. However, you may still need to pay state unemployment taxes.
In determining if you have a household employee, you need to determine the amount of control (i.e. what must be done and how it must get done) you have over that worker. For example:
You hire a business to clean your house. This business offers their cleaning services to the general public. This business provides the person and the supplies to clean your house. That person is not a household employee.
On the contrary, you hire an individual to clean your house and you supply that person with the cleaning supplies necessary to clean your house. There is a good chance that person is your household employee.
If you need help determining if you have a household employee, or you realize you do and need help on how to handle it, please give us a call at 207-990-4585 or shoot us an e-mail and we are happy to help.
