Life Events

If you pay someone to work in your home, such as a nanny, housekeeper or in-home caregiver, you may be a household employer with tax obligations. These rules are often called the nanny tax. Here are answers to frequent questions.

Is my household worker an employee?

Generally, if you control what work is done and how it is done, the worker is your employee, even if the work is part-time. This is different from hiring a self-employed provider, such as an independent landscaping company, that supplies its own tools and sets its own methods. Worker status depends on the facts.

Do I have to withhold and pay taxes?

Once you pay a household employee above an annual threshold set by the Social Security Administration, you must withhold and pay Social Security and Medicare taxes. You also pay the employer's share. The threshold changes from year to year, so check irs.gov for the current figure.

What about unemployment tax?

Depending on how much you pay in wages in a quarter, you may also owe federal unemployment tax, and you may have Georgia unemployment tax obligations as well. Check with the Georgia Department of Revenue and the state labor department for current rules.

Do I need to withhold income tax?

You are not required to withhold federal income tax from household employees, but you can if the employee asks you to and submits a Form W-4.

What paperwork is involved?

• Have the employee complete Form I-9 to verify eligibility to work, and keep it on file.
• Get a Form W-4 if you will withhold income tax.
• Obtain an employer identification number.
• Provide a Form W-2 at year-end and file the required copies.

How do I pay the tax?

Most household employers report and pay these taxes with their personal return on Schedule H, either by adjusting withholding or making estimated payments. A payroll service can handle the calculations; see our payroll services.

What if I have not been paying?

Do not ignore it. Penalties and interest add up, and the employee may lose Social Security credit. Talk to a professional about correcting past years. A related benefit: you may be able to claim the child and dependent care credit only if you meet these reporting requirements.

If you employ someone in your home, contact our office and we can help you get set up properly.