Household employer’s tax guide (“Nanny Tax”) – IRS Publication 926

March 27, 2014 by Carol Thompson, EA
Woman blowing bubbles on couch with child

Household employers: Did you hire someone to care for your children in your home? Do you have a gardener, a handyman, or a chauffeur?  How about a caregiver or private nurse for your elderly parent?  Do you file W-2’s for your workers? If there is a person working in your home, and you control what work is done, and how it is done, and you pay that person more than $1,900 a year, then that person is generally your employee. (If you are running for office, please read this carefully. Your constituents may want to know if your household worker has a Social Security number or a Green Card!)

Self-employed workers: If the worker has an independent business, controls how the job is done, provides his or her own tools, and offers the same services to the general public, he or she may be self-employed, and is not your employee.

“Green Card” Is the worker lawful in the United States? It is unlawful to hire someone who is not a legal resident of the United States. You must have a copy of Form I-9 for all household employees. The employer must have copies of identification on file. (Search for the I-9.)  (If you are running for office, do not skip this step.)

Employment Taxes: You will need to withhold and pay social security and Medicare taxes, and potentially federal and state unemployment tax. You do not have to withhold federal or state income tax unless the employee requests that you do. Be sure to check with your state agency.  Most require that you have a state employer number and file separate reports.

Employer Federal ID Number: You will need an employer ID number. Click on the Apply for an EIN Online link under Tools.

How do you report the taxes? Most household employers can simply attach Schedule H to their Form 1040. The taxes are reported as a tax on the 2nd page of the 1040, and the taxes paid may be deductible on your Schedule A, C or F. You may need to increase your estimated tax or withholding tax to account for the additional amounts you must pay.

More Information:  Search “Household Workers,” Schedule H, and Publications 926 (Household Workers) and 505 (Withholding and paying taxes).

Remember - If you are running for office, please read and follow all directions.

 

Tags: Nanny Tax

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