You are responsible to file and pay household employment taxes for all individuals to whom you paid $1800 or more last year in conjuction with your personal income tax return.
Many people don't know (or prefer to forget!) that individuals that they employ on a temporary or casual basis may trigger household employment tax obligations - the so-called "nanny taxes."
Household employees may work full time or part time, weekly, monthly or even temporarily. If you pay the individual $1800 or more you must provide that worker a W-2 form and the employer must pay the payroll taxes.
Household employment taxes - known as the "nanny taxes" - include:
- Social Security & Medicare Taxes (15.3% of Gross Wages - employer may collect 7.65% from the employee via deductions.)
- State Unemployment Taxes where required.
- Federal Unemployment Tax (FUTA) where required.
The IRS makes you, the employer, legally obligated to pay (remit) both employee and employer portions of Social Security and Medicare taxes. Even if you didn't deduct this tax from the cleaning lady or babysitter, the employer remains responsible to remit or pay the tax to the IRS. The household employee CANNOT remit their share of Social Security and Medicare tax independent of the employer.
Trying to classify your weekly (bi-weekly, monthly) cleaning lady as an independent contractor is not a good idea. The goverment has make enforcement of proper employee classification a priority, and the IRS and state governments are formally sharing information electronically to facilitate enforcement. Your cleaning lady is only an independent contractor if the worker is properly incorporated, bonded and licensed in the trade and maintains "corporate formalities." The IRS makes it your responsibility to know the difference!
If you hire and pay a cleaning service, even if they send the same person every visit, and you pay the business, you will generally be free of any "nanny tax" liabilities. The key is that your credit card is being charged by ABC Maid Service, or you are writing a check to ABC Maid Service directly.