How to Pay Household Employment Taxes (The Right Way)

Hiring someone to work in your home—whether it’s a nanny, a senior caregiver, or a personal assistant—is an act of trust. It’s also the start of a legal relationship that comes with tax and payroll responsibilities many families don’t expect.

If you're a household employer, or you're guiding a family that is, it’s important to understand what the law requires and how to handle it correctly. Paying household employment taxes isn’t just about compliance—it's about protecting your employee, your family, and your peace of mind.

Let’s walk through how it works—and why so many families ultimately look for expert help.

What Are Household Employment Taxes?

Household employment taxes—often called "nanny taxes"—refer to the federal and state tax obligations that arise when you hire someone to work in your home. If you pay a household worker more than $2,800 in 2025, you’re legally required to:

• Withhold and pay Social Security and Medicare taxes (FICA)
• Pay federal and state unemployment taxes (FUTA & SUTA)
• Report wages and pay employment taxes to the IRS and your state
• Issue a W-2 to your employee
• File Schedule H with your personal tax return

Step-by-Step: How to Pay Household Employment Taxes

Here’s what household payroll looks like when you do it yourself:

1. Register as an Employer

You’ll need to apply for a household employer Federal Employer Identification Number (FEIN) with the IRS and register with your state’s unemployment insurance agency. Some states also require registration for withholding income taxes.

Tip: Some states have separate systems for unemployment tax and income tax. Keep track of login credentials, deadlines, and agency correspondence.

2. Understand Wage Rules

You’re responsible for complying with both federal and state labor laws, including:

• Minimum wage
• Overtime (usually after 40 hours/week, depending on your state and locality)
• Paid sick leave or other leave laws (depending on your state and locality)

These rules can change based on location, so local knowledge matters.

3. Withhold and Pay the Right Taxes

Each payday, you’ll need to:

• Calculate your employee’s take-home pay based on gross wages
• Withhold FICA taxes (7.65%)
• Withhold state and federal income taxes (if applicable)
• Withhold additional state and locally required employee taxes (if applicable)
• Pay your employer share of FICA(7.65%) and unemployment taxes

You’ll also need to remit these taxes to the appropriate agencies, usually quarterly.

4. File Reports on Time

Federal, state, and sometimes local tax agencies expect regular reporting of wages and taxes:

• Quarterly wage reports
• Unemployment insurance filings
• Annual W-2s and associated filings
• IRS Schedule H, included with your personal tax return

Missing a deadline—even by a day—can result in penalties or interest.
Click here for a guide to requirements and deadlines.

Why Families Should Pay Legally

Some families are tempted to pay “under the table,” often out of concern that the tax process is too difficult. But the risks of skipping payroll compliance are real:

• You may owe back taxes, penalties, and interest if the employment relationship is discovered
• Your employee won’t have access to Social Security benefits, unemployment insurance, or verifiable income without exposing the employment relationship
• You could face issues with homeowner’s insurance coverage, or liability claims if your employee is injured

Paying legally ensures your employee is protected, and your family is too.

Good Intentions Aren’t Enough

While many families start off intending to handle payroll on their own, they often discover that:

• Rules and calculations vary by state, pay frequency, and work hours
• Tax agencies use different systems and timelines
• Staying current with new laws (like domestic worker bill of rights legislation) is a challenge
• Even small mistakes can have long-term consequences

For time-pressed families—or those managing multiple household staff—it can be difficult to stay on top of everything while maintaining your focus on what matters most: your home, your family, and your employee’s well-being.

There Is an Easier Way

That’s why thousands of families across the U.S. choose to partner with HomeWork Solutions. We’ve specialized in household payroll and tax compliance since 1993, and we make sure everything is handled accurately, on time, and in full compliance—every pay period, every quarter, every year.

When you work with us, we take care of:

• Registering with tax agencies
• Calculating pay and taxes
• Filing and remitting taxes
• Creating pay stubs
• Generating year-end W-2s
• Generating a year-end Schedule H

So whether you're hiring a nanny, a caregiver for a loved one, or any other in-home employee, you don't have to become a payroll expert overnight. We make it easy for you to pay legally—and focus on the relationship that matters most.

Ready to Take Payroll Off Your Plate?

Explore our Household Payroll Services or talk to a payroll specialist to find out how simple compliance can be with the right partner.