If you have a household, or domestic, employee then you may have employment tax obligations to fulfill as an employer. While some household employees may seem obvious, others may not. To stay compliant, it’s important to first understand the definition of each and then which IRS, state and local obligations may apply.
If you pay an individual to provide a service in your home, meaning you control what work is done and how it is done, then you have an employee. Common examples include babysitters, nannies, housekeepers, private nurses and yard workers.
If only the worker can control how the work is done, then that individual is not your employee but is considered to be self-employed in the eyes of the IRS. A good rule of thumb to follow is that a self-employed worker generally provides his or her own tools and offers services to the general public as an independent business.
A worker who performs child care services for you in his or her home generally is not your employee. Similarly, if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.
For example, Bob Smith provides lawn services at your residence. Bob runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither Bob nor his helpers are your household employees.
If you do in fact have a household employee and meet the thresholds below, you will be required to withhold (if applicable), file and pay related employment taxes. Your obligations will include the following:
In addition, know there are other requirements and considerations, including:
If you think you may have a household employee, or if you aren’t sure, talk with your tax advisor to help ensure you are fully compliant with IRS, state and local rules and obligations.
Ccontact a member of your service team or contact Deb Elfers at firstname.lastname@example.org for further discussion.
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.
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