It's almost time to say goodbye to another year! Our experienced team of professionals at HomeWork Solutions is here to help you stay on top of the deadlines and other details that you need to have when it comes to household payroll. This year, there were a variety of important action items that took place both on a state and federal level. Here’s a quick description of important must-knows:
Updated December 17, 2105
For 2016, household workers who are paid $2000 or more in the calendar year must be issued a W-2 form and the household employer (the family) must contribute to Social Security and Medicare taxes.
The 2016 IRS standard mileage rate will decline to 54 cents per mile for business miles driven, down from 57.5 cents per mile in 2015. To reimburse your household worker's work related travel on a tax free basis, the worker must provide you the proper documentation. Documentation must include include the date, description, work-related purpose of the travel and amount of miles driven.
This year, Oregon and Massachusetts enacted a domestic worker bill of rights, joining New York, California, Hawaii and Montgomery County MD. Additionally, Wage Theft Prevention Acts in California, Connecticut, the District of Columbia, Massachusetts, New York, and Oregon place new obligations on household employers. This means that household employers will be required to provide household employees pay rate notices that include specific information such as regular and overtime pay rates, a statement of benefits, statements that employees have the right to worker’s compensation, and much more. Employers are also required to keep accurate records of days and hours work and keep these records for two years, and also provide written performance records when requested by an employee. This year, Maryland and New York also enacted a paid sick leave laws for household employees, which will allow employee’s a specific amount of paid sick leave based on how many hours they work. Oregon and Massachusetts require that the household employer provide sick leave, but it is generally unpaid unless the household has a staff.
New laws were put into practice this year requiring that employers now provide burden of proof showing that they have paid workers fairly and that employees were not short changed. If employers have not paid their worker’s fairly for time they have worked, they will be charged with wage theft. California also made an important ruling that affects nannies or senior caregivers that rely on 24 hour care. The California Supreme Court ruled that unless sleep time deduction is listed on the CA Wage Order, then it is not permitted to deduct sleep time. This effectively prohibits household employers from deducting for sleep time in California.
With the enactment of the Affordable Care Act, there has been confusion on who will be affected and how that will change household employer/employee healthcare. For employers that have only one employee (whether it’s a housekeeper, senior care provider, or nanny), employers can continue to reimburse the household employee’s individual health insurance premium on a tax free basis and exclude this from the employee’s W2 form. Household employers with two or more employees must themselves purchase insurance throught the SHOP and contribute at least 50% of the premium to make this a non-taxable benefit.
Another important item discussed this year by the US Department of Labor includes defining guidelines that are aimed at misclassifying workers versus independent contractors. The US DOL has stated outright that "MOST WORKERS ARE EMPLOYEES" and the burden of proof to justify classifying a worker as an independent contractor is on the employing party. If employers do not classify their workers correctly, they could be held responsible forALL employment taxes as well as state and local penalties. Nannies, housekeepers and senior care workers are employees under IRS rules.
Senior caregivers are employees, either of a staffing agency or the family engaging their services. Since 1974, senior care companions have been specifically exempted from the FLSA's minimum wage and overtime protections. This all changed in 2015. The determination of which senion home care workers are exempt from minimum wage and overtime is based on both duties and who employs the senior caregiver.
To qualify as companion care, the caregiver:
A caregiver that provides any housekeeping services DOES NOT meet the definition of a companion under the new regulations and is therefore entitled to be paid at no less than the minimum wage and must be paid overtime if they are not a "live in" caregiver. Live in is defined as the employing family's home is the caregiver's primary residence, and the caregiver is in the residence at least 120 hours weekly.
Don’t forget that January 15th is the final day to make estimated Federal Payments for the previous tax year. If you pay after this date, payments will be applied to this year’s obligations and you will also pay the tax with your annual personal income return. Late payments are not allowed. In addition, remember that if you write your household employee’s paycheck, be sure to recalculate paycheck deductions with the first payroll in January to update income tax deductions.
Not sure of where to start when it comes to managing or keeping track of all of the updates that happen with payroll taxes every year? Let us do the work for you! We are experts and we’re on your side. We know that you have a lot on your plate, so that’s why we pay attention to the changes so you don’t have to worry about it. Contact our professional and experienced team today to talk about how we can help.
Household Employer Pay Rate Notice (FORM)
HWS Guide to Household Payroll (eBook)
Temporary Household Workers and the "Nanny Taxes" (White Paper)
Household Workers and the Affordable Care Act
The 1099 Myth in Senior Homecare
Nanny Given a 1099 Fights Back
Trust Company Liable for Failure to Pay 'Nanny Taxes'?
Federal and State Governments Share Information for Employment Tax Enforcement