Household Employees and Taxes

People who work around your house under your direction are generally household employees. These include housekeepers, maids, baby-sitters, gardeners, and others.

Contractors - repairmen, plumbers, etc., - and other business people who work for you as independent contractors, are not your household employees.

The main difference is that you control what household employees do as well as how they do it.

If you pay a household employee more than $1,800 in 2012 then you need to withhold and report both social security and Medicare taxes from their pay. In addition to withholding this from the employees pay, you will need to match this amount as the employer and pay the total sum to the IRS.

There are some exceptions to these withholding requirements including payments made to:
1. your spouse,
2. your child who is under age 21,
3. your parent, unless an exception is met; or
4. an employee who is under age 18 at any time during the year. This applies unless this work is their principal occupation. If they are a student, then this work is not considered their principal occupation.

IRS Publication 926: Household Employer's Tax Guide has more details on staying compliant with is part of the tax law.

You are not required to withhold Federal income taxes from your household employees’ pay, but you can if you and your employee agree to do this, IRS Publication 15 Circular E, Employer’s Tax Guide can guide you through this process.

Additional filing requirements might include Federal Unemployment Tax (FUTA) and Forms W-2 and W-3 for any federal withholding that you did during the year. Also, you will need to file Schedule H, Household Employment Taxes, with your individual tax return.

For more information on Household Employees, refer to the IRS Topic 756 - Employment Taxes for Household Employees.