It is becoming more common to have a household employee to help with child care or senior caregivers. If you hire someone on your own then understanding employment tax rules will help you avoid tax pitfalls if you are a household employer. If you pay an agency for finding and supplying the individual that provides this service, then this does not apply.
If you hire someone and control what hours are worked and where and how the work is performed, then you have a household employee. There are Labor Law and payroll tax responsibilities associated with having a household employee and we will address the payroll tax in this blog.
First, when you pay your household employee $2,100 or more in a calendar year or $1,000 or more in any calendar quarter; you are required to withhold payroll taxes including FICA (Medicare & Social Security) from your employee’s paycheck. You are also responsible to pay the employer’s portion of FICA, FUTA (federal unemployment tax), SUTA (state unemployment tax).
Next, you are required to obtain an employer identification number (EIN), and file all required forms. This includes making quarterly deposits using form 1040-ES quarterly for the required FICA and any federal withholding tax, and file schedule H with your federal form 1040. Those who live in New York State will also have to file quarterly payroll return form NYS-45.
Finally, you will need to file forms W3 and W-2 with the Social Security Administration each year and issue a W-2 to your employee.