Household Employer. Really?
Household Employer… Really? I’m only paying someone to help me at my home!
Do you pay someone to work at your home? Do you control what work is done and how it is done? Maybe you have one of the following types of workers.
Babysitter
Caretaker
Private Nurse
Cook
Health aid
Maid or cleaning worker
Yard worker
Others
Families have hired caretakers, private nurses, or health aids to care for a loved one. Self-employed individuals often hire a housekeeper or someone to clean their house. Parents have hired a babysitter or a nanny for their children.
If you hire someone (who is not an independent business) to work for you in your home, you may have made yourself a Household Employer.
Thankfully, the Internal Revenue Service (IRS) provides some relief for household employers. If the worker receives wages under $2,100 (for 2019), the household employer is not required to withhold and pay social security and Medicare taxes or issue the worker a Form W-2 at year end.
But you still need to monitor that threshold very carefully because if you pay total wages over $1,000 to one or more workers in a calendar quarter, the IRS requires to you pay federal unemployment tax of 6% on the first $7,000 of wages of each worker (unless a credit applies to reduce the 6% to 0.6%). In addition, your state may require you to pay state unemployment tax. This is true for Wisconsin; for wages over $1,000 to one or more workers in a quarter, you are required to pay tax of 3.25% (new employer rate) on the first $14,000 of wages of each worker.
If you meet the wage threshold to pay unemployment taxes, you’ll need to establish a state unemployment account and file IRS Schedule H with your individual tax return.
What happens, though, if you know the worker will be paid more than $2,100 during the year? You have additional requirements. I will explain the specifics in a future blog post.
Also, keep in mind that exemptions to federal and state requirements may exist if you pay wages (even if more than $2,100) to the below individuals.
Your spouse,
Your child under the age of 21,
Your parent, or
Any employee under the age of 18.
Because of the various exceptions, exemptions, and case-by-case situations, I suggest you speak with your tax professional to determine your reporting requirements. IRS Publication 926 is also a good resource.