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Tax Tidbit: Filing the Correct Tax Forms for a Household Employee

Posted by Kathleen Webb on Mar 18, 2014 7:00:00 AM

Regardless of whether your household employee is full time or part time, employers are required to pay employment taxes if the employee is paid $1900 or more per year (in 2014).

"Household employee" is a term that includes domestic workers such as nannies, housekeepers, elder caregivers, home health aides and house managers. These workers are NOT independent contactors. For these employees, employers are responsible to pay Social Security, Medicare and Federal Unemployment Taxes (FUTA).filing taxes

In order to avoid penalties, household employers should have the following forms on hand:

  • Form SS-4: For obtaining an Employer Identification Number
  • Form W-2: Shows the amount of taxes withheld from your paycheck for the year and is used to file your federal and state taxes
  • Schedule H: Helps calculate your employment taxes
  • Form I-9: Verifies the identity and employment authorization of individuals hired for employment
  • Form W-4:Used by employees to instruct employers on their withholding tax status.

Families all too often misclassifiy their household employees as contractors, and these employers incorrectly issue their household employees a 1099 tax form. A 1099 is exclusively used for independent contractors, which are employees that set their own hours, supply their own tools/machinery required to perform the job and offer services to the general public. Misclasification and filing incorrect tax paperwork can lead to fines, imprisonment and overwhelming legal fees.

Read more about the different tax obligations for independent contractors and household employees here.

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The IRS estimates that a family will spend 40 - 60 hours a year on nanny tax compliance research, paperwork and filings. HWS offers a variety of flexible service plans that range from $525 - $850 per year. We offer free telephone consultations at 800.626.4829.

Topics: household employee, household employer, nanny taxes, 1099 v w-2, household payroll tax, household payroll

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