![]() The Medicare tax rate is 2.9% on all cash wages. You withhold 6.2% from the employee’s wages and pay the other 6.2% out of your own pocket as the employer. If you cross that threshold, the Social Security tax rate is 12.4% on all cash wages up to $142,800. If I have a household employee, what are my FICA tax obligations?įor 2021, the FICA tax issue arises if you pay a household employee $2,300 or more during the year. ![]() Yard care workers, pool service guys, maids and the like who provide services to the general public and just show up at your place periodically to go about their business are not your employees. However, if an agency supplies the worker and controls what work is done and how it’s done, the worker is not your employee. It doesn’t matter whether the work is full-time or part-time or if you hired the worker through an agency. So, if a worker regularly comes to your home on a schedule dictated by you and is supervised by you, the worker is probably an employee. Household employee definedĪccording to IRS Publication 926, a person who does household work for you is your employee if you control not only what work is done but also how the work is done. The basic tax rules for garden-variety employees are similar to those for household employees, but there are different compliance requirements. However, an individual who provides these types of services may be a garden-variety employee as opposed to a household employee. Services performed in your home that are not of a household nature, such as those provided by a private secretary, personal assistant who does not perform household chores, tutor, or librarian aren’t considered household work. Household work only includes performing services in or around your private home. According to IRS Publication 926 (Household Employer’s Tax Guide), household employees do household work - such as performing as a babysitter, butler, caretaker, cook, driver, health aide, housekeeper, maid, nanny, or private nurse. Household work definedįirst of all, let’s clarify who can potentially count as a household employee. ![]() The Nanny Tax issues covered here only apply if a household worker is actually your employee - as opposed to an independent contractor - under the federal tax rules. Do you actually have a household employee? For any state stuff, you’ll need to contact your friendly neighborhood payroll tax service or tax pro.įailing to comply with nanny tax rules can result in fines and other problems, such as not being protected in the event of a worker’s compensation claim if your household employee is injured on the job. Here in FAQ format is what you need to know about the federal tax issues for household employees. You may also owe the federal unemployment tax (FUTA) on wages paid to a household employee.įinally, you may be required to withhold and deposit state income tax on wages paid to a household employee, and you may have to pay for state unemployment insurance too. The employee and employer shares of Social Security and Medicare taxes are collectively referred to as the FICA tax. The Nanny Tax refers to your duty to withhold and deposit a household employee’s share of Social Security and Medicare taxes on wages paid to the employee and also deposit the employer’s share of those taxes.
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