A client mentions in passing that they hired a housekeeper earlier this year. They come twice a week, and your client has been paying them by Venmo.
You already know where this is going. The question is what to do about it, and how to make the resolution easier for both of you than it sounds.
You remember household employment. Here's the fast refresh.
You don't need Publication 926 recited back to you. Quick refresher: it's the degree of control the family exercises over the work that determines the classification, not what the client calls the arrangement. Pay $3,000 or more to a household worker in 2026 and FICA obligations kick in. Unemployment insurance kicks in even lower. The Venmo payments don't change any of that. They just make the audit trail more visible.
If the client wants to review the source material, IRS Publication 926 is the right link to send. We also have state-specific tip sheets.
The workers most often misclassified
Nannies are more likely to be correctly classified because the term itself triggers awareness. The categories people miss are nearly everyone else:
- Housekeepers who come regularly throughout the week
- Senior caregivers hired directly, without an employment agency
- Family assistants and house managers
- Personal chefs working in the client's home
These arrangements typically begin as "I just pay them a flat weekly amount," which the client doesn't mentally categorize as employment. That's the classification gap you're catching.
Why "just 1099 them" isn't the shortcut it appears to be
This is the part clients need you to help them understand, because there is real skin in the game.
It's the law. Not a gray area for workers who meet the household employee definition. And the enforcement mechanisms sit outside the client's control. When the worker files for unemployment, is injured on the job, or reports the income on their own return, the classification question gets answered by someone other than your client.
The financial exposure is real. Back taxes on both halves of FICA, penalties, interest, and in many states, wage-claim exposure and workers' comp liability. It regularly reaches five figures by the time it surfaces.
It protects the client's other planning. Dependent Care FSA reimbursements require legitimate employment. The Child and Dependent Care Tax Credit does as well. Medicaid look-back reviews for elderly clients scrutinize every caregiver payment. Cash arrangements quietly undermine plans you've spent years building.
It protects the worker, which protects the relationship. A household employee paid on the books earns Social Security and Medicare credits, builds a documented work history that supports future employment and lending, and becomes eligible for unemployment insurance. In states with paid family leave or short-term disability programs, they become eligible for those, too. These benefits belong to them, and cash arrangements silently erode them. Clients who genuinely care about the person working in their home tend to care about this once it's named directly.
A filing cadence note worth flagging
One detail that trips up new household employer clients: state unemployment insurance and state income taxes withheld can follow different schedules from federal ones, depending on the state. Some require quarterly filings for household employers; others allow annual filings. Getting the client on the correct cadence from the start prevents the "why did I receive this penalty notice" call four months later.
How to raise it without straining the relationship
Frame it as protection, not accusation.
"I noticed something that could save you a headache down the road" lands better than "you've been handling this incorrectly." Most clients respond well once they understand the reasoning, especially the pieces that connect to their own financial planning and the pieces that protect the person working in their home.
The part where your tax season gets easier
Here's the honest pitch.
Household payroll is one of those niche areas where you can either absorb the work yourself or hand it to a specialist who does only this. Absorbing it means registering the client with the IRS, state, and potentially local labor and tax authorities, running filings on the correct schedule, obtaining the household employee's W-4, producing the W-2, preparing Schedule H, and reconciling state-specific reports along the way.
When HomeWork Solutions handles the payroll piece, your January and February look different:
- The client's Schedule H data arrives clean and ready to drop into the return
- The W-2 is already filed with SSA and sent to the employee
- State reconciliations are complete
- You can see everything you need in one place
No mid-February scramble to figure out how much state unemployment insurance was paid, or not paid. No client email at 9pm on April 12 asking whether overtime was calculated correctly.
The referral opportunity
Household payroll is the kind of value-add that gets discussed at dinner parties. Advisors who solve it become the advisor for that client's entire peer group. If you'd like to establish a standing referral relationship, we have a partner program set up specifically for CPAs and financial professionals.
If a client came to mind while you were reading this
That's usually a sign.
We're happy to talk through the resolution, either for that specific situation or as a broader referral conversation. A short call is enough to see whether this is a good fit for how you already run your practice.