Do I have to pay taxes on what I pay to my Household Employee?
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 cash wages of $2,000 or more for 2016, then you need to withhold and report both social security and Medicare taxes from their pay. You generally must withhold 6.2% of social security and 1.45% of Medicare taxes (for a total of 7.65%) from all cash wages you pay to that employee. You also must pay your share of social security and Medicare taxes, which is also 7.65% of cash wages. (Cash wages include wages you pay by check, money order, etc.) Unless you prefer to pay your employee's share of social security and Medicare taxes from your own funds, you should withhold 7.65% from each payment of cash wages you make to the employee, and pay this amount, along your matching share, to the IRS.
There are some exceptions to these withholding requirements including payments made to:
- Your spouse
- Your child who is under age 21
- Your parent, unless an exception is met
- An employee who is under age 18 at any time during the year, unless this work is their principal occupation. If they are a student, this work is not considered their principal occupation.
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.
TurboTax Deluxe and above editions will help you with any household workers.