Do You Have Household Employees? Here’s How to Avoid Trouble with the IRS

Do you pay someone to work in your home? Maybe a nanny or a gardener? Do you control what work is done and how it’s done? If so, that person may be considered your employee in the eyes of the IRS. If you pay them over $2,000 in 2017, you’ll need to issue them a W2 and pay payroll taxes for that employee. There’s no statute of limitations for failure to pay, and penalties and interest can easily double the amount owed in just a few years. Plus some professionals, like attorneys or medical doctors, can lose their livelihood by being disbarred or losing their professional license if they don’t pay. And if you don’t file and pay, your household employee has a harder time documenting their work history and may not receive all the Social Security and Medicare benefits they’re eligible for at retirement.

The good news is we can help you stay on the right side of the law with your household employees. Payroll taxes for household employees can be paid along with your income tax on your 1040. Payroll taxes consist of Social Security and Medicare taxes. Half of the total is paid by the employer, and the other half can either be withheld from the employee’s wages or paid by the employer. If you pay over $1,000 in wages in any quarter during the year, you may also owe Federal unemployment taxes. You may also need to register with your state to pay state unemployment taxes. You should issue your employee a W2 by the end of January, so it’s not a good idea to put all of this off until you file your tax return. We can help you with the needed record-keeping, filing requirements and calculation and payment of taxes owed, so call our office today.