Household Employment Taxes

 

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:

  • Housekeepers
  • Maids
  • Nannies
  • Gardeners

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
  • Medicare tax
  • Federal unemployment tax
  • State unemployment tax (varies by state)

Social Security and Medicare

If you pay a household employee cash wages of $1,900 or more in 2020, those cash wages are:

  • Social Security wages
  • Medicare wages

It doesn’t matter when the employee earned the wages. You’ll owe Social Security and Medicare taxes on all of those wages.

If you paid the employee less than $1,900 in cash wages in 2020, none of the wages 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
  • Spouse
  • Parents, in many cases

Federal unemployment tax (FUTA)

You might have paid household employees for cash wages of $1,000 or more in a calendar quarter of 2020 or the previous year. FUTA wages are the first $7,000 of cash wages paid to each household employee in 2020 and 2021.

Calendar quarters include:

  • January through March
  • April through June
  • July through September
  • October through December

If your employee’s cash wages reach $7,000 during the year, don’t figure FUTA tax on the wages you pay the employee for the rest of the year.

The cash wages you paid in 2020 might still be FUTA wages if both of these apply:

  • The cash wages paid are less than $1,000 in each calendar quarter of 2020.
  • You had a household employee in 2019.

They’re FUTA wages if the cash wages you paid to household employees in any calendar quarter of 2019 were $1,000 or more.

The rules regarding payment of federal unemployment tax don’t apply to your:

  • Children under age 21
  • Spouse
  • Parent

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 $1,900 or more for tax year 2020
  • 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 2020, you paid any of these:

  • Cash wages of $1,900 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 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.

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