Hiring a household employee is a personal decision that requires a lot of consideration. Whether it’s a housekeeper, a nanny, or senior caregiver, hiring an experienced worker in your home is important. Did you know that as soon as you hire someone ,you become a household employer? That means you will need to pay them as an employee – not off the books. Here’s why you should never evade “nanny taxes.”
You might think you can save money by paying your employee under the table. If you’re caught, you could face back taxes and hefty fines. All it takes is an employee who files for unemployment benefits in the future. They may report you as an employer and the state may come asking for those unpaid unemployment taxes. 
Paying on the books is also the right thing to do. You’ll provide your employee with the dual safety nets of unemployment insurance and social security benefits. This can provide income in retirement or times of need like when disabled or between jobs. These benefits demonstrate to employees that you value their work and view them as the professionals they are.
Legal pay also allows you to access workers compensation insurance (required in most states) and tax credits, and it opens up opportunities for your employee as well. She/he can apply for credit with a paystub or W2, or take advantage tax employer sponsored benefits like education and healthcare, or tax advantaged savings plans for retirement. Thanks to tax breaks, these options might not be as expensive as you think.
If you’ve hired an in-home employee and you pay them more than $2,300 in calendar year 2021, you are officially an employer. You must pay employment taxes on your federal tax return in addition to paying taxes for Social Security and Medicare.
Does payroll sound overwhelming? You’re not alone. Not everyone has the ability or desire to take on managing an employee’s payroll and taxes. It’s important to withhold the proper amount of taxes and ensure all deadlines are adhered to. Every state has different rules and requirements when it comes to a household employee. Our experienced team of payroll and tax specialists at HomeWork Solutions can step in to help. This ensures your employee is paid on time and accurately. Then you can rest knowing that there are no expensive surprises when tax season comes around every quarter.
Hiring a professional team to oversee the details of your household payroll and taxes will save you the headache of doing it yourself. We can help get things set up at the onset of hire or doing back filings so you can ensure everything is done right.. Contact us today for details at 1-800.626.4829 or www.homeworksolutions.com