What taxes does my domestic (elder care giver, home health aide, housekeeper, maid) pay?
Your household employee (home health aide, housekeeper, maid, etc.) contributes to or pays:
- Social Security & Medicare Taxes (7.65% of Gross Wages Collected and Remitted by Employer)*
- Employee Disability/Unemployment Taxes where required.
- Federal/State Income Taxes
* For January 1, 2011 - December 31, 2012 ONLY, the nanny's contribution to Social Security & Medicare Taxes is reduced to 5.65%. The is the Federal Payroll Tax Holiday which will expire 12/31/12. Employer contribution remains the same.
The employer is solely responsible for the remittance of the Social Security and Medicare taxes. You and your household employer cannot legally agree that she will "take care of the taxes." Even if the employer fails to collect this tax from the employee via periodic payroll deductions, the employer remains responsible to remit or pay the tax to the IRS. The household employee CANNOT remit their share of Social Security and Medicare tax independent of the employer.
Why this matters...
This has some uniquely important implications in an eldercare situation. We have helped many spouses and adult children of the individual receiving the care deal with the consequences of failing to pay these employment taxes. Eventually the caregiver will be let go. Either the individual receiving the care will recover, will decline and move to a professional setting such as a nursing home, or will pass on. This means that eventually the caregiver (aide, housekeeper, etc.) will be unemployed and in need of unemployment insurance benefits. This is when it gets dicey for the family, as they suddenly realize that they have tax obligations, sometimes for many years.
We encourage you do download our Household Employer's Quick Start Guide at right or phone the office for a free consultation to learn more about your payroll tax obligations and the mechanics of household payroll.