Employment Taxes for Household Workers in header of articles
Employment Taxes for Household Workers
The IRS usually considers you an employer of a person when both of these apply:
You hired the person to work in your home.
You have control over how the person performs the work.
These employees include:
As an employer, you might have to pay employment taxes -- also known as the nanny tax. Employment taxes you might have to pay include:
Social Security tax
Federal unemployment tax
State unemployment tax (varies by state)
Social Security and Medicare
If you pay a household employee cash wages of $1,800 or more in 2012, those cash wages are:
Social Security wages
It doesn’t matter when the employee earned the wages. You’ll owe Social Security and Medicare taxes on all of those wages.
However, you might have paid the employee less than $1,800 in cash wages in 2012. If so, none of the wages paid to the employee are Social Security and Medicare wages. You won’t owe Social Security or Medicare tax on those wages.
The rules regarding payment of Social Security and Medicare taxes don't apply to your:
Employees under age 18
Children under age 21
Parents, in many cases
Federal unemployment tax (FUTA)
You might pay cash wages to household employees for $1,000 or more in any calendar quarter of 2012 or the previous year. If so, FUTA wages are the first $7,000 of cash wages paid to each household employee in 2012 and 2013.
Calendar quarters include:
January through March
April through June
July through September
October through December
Your employee's cash wages might reach $7,000 during the year. If so, don't figure the FUTA tax on further wages paid to that employee during the rest of the year.
The cash wages you paid in 2012 might still be FUTA wages if both of these apply:
The cash wages paid are less than $1,000 in each calendar quarter of 2012.
You had a household employee in 2011.
They’re FUTA wages if the cash wages you paid to household employees in any calendar quarter of 2011 were $1,000 or more.
The rules regarding payment of federal unemployment tax don't apply to your:
Children under age 21
You're not required to withhold federal income tax, but you can if your employee requests it.
You must file a separate W-2: Wage and Tax Statement for each household employee you pay either of these:
Social Security and Medicare wages of $1,800 or more for tax year 2012
Wages you withheld federal income tax from
You might need to file Schedule H with your individual return to report household employment taxes. Do this if, in 2012, you paid any of these:
Cash wages of $1,800 or more to any one household employee
FUTA wages -- total cash wages of $1,000 or more in any calendar quarter to all household employees
Wages to household employees you withheld federal income tax from
If you have to to file Schedule H or a W-2, you must have an employer identification number (EIN). You can get one by either:
Filing Form SS-4: Application for Employer Identification Number
Applying online at www.irs.gov
To learn more, see Publication 926: Household Employer's Tax Guide at www.irs.gov.