I have a domestic worker (aide, elder care giver, housekeeper) working in my home. What taxes do I need to pay?
The following information applies to household workers whom you pay directly. If you contract these services through a third party and make all payments to the third party you are not legally the employer of the caregiver.
In general, the Internal Revenue Service requires payroll tax filings by a domestic employer who pays a household employee directly more than $1800 (2012)* cash wages in a calendar year. These payroll tax obligations may include:
- Social Security & Medicare Taxes also known as FICA tax (7.65% of Gross Wages)**
- Federal Unemployment Tax (FUTA) (0.8% of Gross Wages or less in Most Circumstances)
- State unemployment and disability insurance taxes levied on the employer.
Examples of job titles that are typically considered household employees include aide, companion, housekeeper, cleaning lady (individual), maid, cook, personal assistant, household manager, caretaker, butler, valet, and driver. We provide more information about distinguishing a household employee from an independent contractor here.
(* The wage payment threshhold that obligates a family to pay the nanny taxes is indexed and has changed many times over the years. For years 2009 - 2011 the threshold is $1700)
(** The FICA taxes are shared between employer and employee. Typically, each party contributes 7.65%; however, for January 1, 2011 - December 31, 2012 only the employee contribution is reduced to 5.65%. This is due to the Federal "Payroll Tax Holiday" which will expire 12/31/12. If the family fails to collect this tax via payroll deductions from the employee, the family will be liable for both the employer and employee portions of the tax.)