How to Transition Your Caregiver to Legal Pay — The Stress-Free Way with HomeWork Solutions

Correcting the mistake of wages paid under the table is the right thing to do, and we can help.

If you’ve been paying your household employee "under the table" — whether it's a nanny, senior caregiver, private educator, or housekeeper — you’re not alone. Many families start this way, unaware that they’re considered employers with payroll tax responsibilities. But once you know, the best move is to correct course.

Here’s the good news: HomeWork Solutions makes it easy to catch up. We handle the calculations, filings, and paperwork for you. Now you can sleep easy not having to worry about IRS audits, the absence of needed documents in the event of a wage dispute, or interest adding up on unpaid employer taxes. Our experts have been helping families for over 30 years, and we’re ready to help you, too.

If you’re ready to protect your family and give your employees the benefits they deserve, here’s how the process works. And don’t worry — we’ll be with you every step of the way.

Steps to Transition to Legal Pay

1. Calculate What’s Owed (And Who’s Responsible for It)

The first step in getting on track is figuring out what taxes are owed and who’s responsible for them. Household employment taxes fall into three key categories:

• Social Security and Medicare (FICA) taxes: Typically, this is split 50/50 between employer and employee. However, if you didn’t withhold the employee’s share from their pay, you’ll need to cover 100% of this amount yourself for wages paid to date.
• Unemployment taxes (FUTA and SUI): These are always the employer’s responsibility.
• Employee income taxes: These taxes are the employee’s responsibility. If you didn’t withhold them, your employee can resolve it with tax authorities when they file their own tax returns. Alternatively, you may choose to "gross up" their wages and pay the taxes on their behalf.

Note that when the employer picks up the tab on taxes that were the employee’s responsibility, precise calculations are required, as the additional money counts as taxable income for your employee.

How HomeWork Solutions makes this easier:
We handle the calculations for you. Our experts will determine exactly what’s owed and present you with clear options. No guesswork, no stress.

2. Talk to Your Caregiver About the Change

If your caregiver is used to receiving a flat paycheck (like $800/week), the idea of taxes being withheld may come as a surprise. It’s important to communicate what you plan to do about catching up on past taxes and what their take-home pay (net pay) will look like moving forward. Reassure them about the benefits of being paid legally.

Key talking points:

• Explain the benefits: Being paid legally gives them access to unemployment benefits, Social Security, and Medicare. This means financial protection if they lose their job or when they retire.
• Be transparent: Let them know you’re making this change to protect both them and your family.
• Show them paycheck examples: HomeWork Solutions can provide a sample to give them a preview of what their pay will look like. This can help avoid confusion when they see taxes withheld.

How HomeWork Solutions makes this easier:
We provide talking points and offer resources to help you explain the change to your employee. If your caregiver has questions, our team is available to provide answers and support.

3. Register as a Household Employer

To catch up and to pay taxes the right way moving forward, you need to register as an employer with both the IRS and your state. This process sets up your employer accounts so you can pay taxes each quarter.

What this involves:

• Apply for a household employer sole proprietorship Federal Employer Identification Number (FEIN) at IRS.gov.
• Register with your state’s Department of Revenue and Workforce agency to obtain state employer tax account numbers.

How HomeWork Solutions makes this easier:
No forms, no stress. We register you as an employer at both the federal and state levels. You’ll be ready to pay your employee legally without the hassle of tracking down forms or waiting on hold with government agencies.

4. Correct Past Tax Mistakes (Before the IRS Finds Them)

If you missed payroll tax deadlines in the past, now’s the time to correct them. Filing late taxes voluntarily is far better than waiting for tax authorities to find the issue.

What needs to be done:

• File federal taxes for previous years using Form 1040X (Amended Return) with a Schedule H attached.
• File state returns for any unpaid state unemployment taxes.
• Pay any back taxes, penalties, and interest. Some penalties may be waived for first-time household employers.

How HomeWork Solutions makes this easier:
Our team calculates the back taxes, prepares the filings, and provides tax documents for you to include with your amended returns, and even requests penalty waivers on your behalf. Our experience means you’ll have a smooth process from start to finish.

5. W-2s and associated filings by January 31

By January 31, you must issue a W-2 to your employee and file associated documents with the Social Security Administration. This ensures your employee has the necessary tax documents to file their taxes.

What’s involved:

• Gather your employee's name, address, and Social Security number.
• Issue Form W-2 to your employee.
• File associated wage documents with the Social Security Administration.

How HomeWork Solutions makes this easier:
We create and send W-2s for your employees and handle the Social Security administration filing for you. It’s all done automatically, and moving forward, you’ll never miss this important deadline.

6. File Schedule H With Your Tax Return

When you file your personal taxes, you’ll need to include Schedule H (Household Employment Taxes). This is where you report the wages, Social Security, Medicare, and unemployment taxes you’ve paid as a household employer.

What you’ll need:

• Your total wages paid to household employees.
• Federal income tax withheld (if applicable).
• Amount of Social Security, Medicare, and unemployment taxes owed.

How HomeWork Solutions makes this easier:
We’ll send you the completed Schedule H, ready to attach to your tax return. No spreadsheets, no confusion, no stress.

7. Plan Ahead for Next Year

The best way to avoid a repeat of this process? Keep a good thing going! By paying taxes as you go, you’ll avoid late fees and penalties — and you’ll never have to worry about being behind again.

How to make it easy:

• Withhold employee taxes from each paycheck.
• File unemployment taxes quarterly.
• Stay ahead of yearend federal filings like W-2s, and Schedule H.

How HomeWork Solutions makes this easier:
Our Complete Payroll service does this all for you. We calculate withholdings, create paystubs, and make sure your employee is paid on time, with all taxes filed as required. We also handle the W-2s and Schedule H documents, so tax time is hassle-free.

Take the Next Step — Let HomeWork Solutions Handle It All

Correcting household payroll mistakes may feel overwhelming, but it’s far better to tackle it now than wait for under-the-table wages to be discovered through an on-the-job accident, unemployment filing, or an audit. The best part? You don’t have to do it alone.

At HomeWork Solutions, we specialize in household payroll and tax compliance. We’ll calculate your back employer taxes, prepare the needed documents, and file all necessary forms for you. From tax account registration to W-2s, we do it all. We’ll even talk to the IRS and state tax agencies about your employer tax filings on your behalf if needed.

Take control of the process today. Call or visit HomeWork Solutions for a free consultation. Our friendly, experienced team is ready to make it easy for you so you can protect your family and your employees and stay focused on what matters most.