Do I have to pay payroll taxes for the cleaning lady that comes weekly?
Any individual whom you employ to provide services in your home whom you pay directly AND whose total payments in the calendar year meets the IRS household employment threshold ($1800 in 2012) must receive a W-2 from the employer (family) and the employer must pay the payroll taxes.
» Historical Household Employment Wage Test Values
- Social Security & Medicare Taxes (15.3% of Gross Wages - employer may collect 7.65% from the employee via deductions. For 2011 & 2012 ONLY, the household employee's contribution to Social Security & Medicare Taxes is reduced to 5.65%. Employer contribution remains the same.)
- State Unemployment Taxes where required.
- Federal Unemployment Tax (FUTA) where required.
The employer is solely responsible for the remittance of the Social Security and Medicare taxes. Should the employer fail 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.
Many families try to classify their weekly (bi-weekly, monthly) cleaning ladies as independent contractors. In the vast majority of circumstances, this is a total legal fiction. This usually only works if the worker is properly incorporated, bonded and licensed in the trade and maintains "corporate formalities."
Video: Employee or Independent Contractor?
If you wish to avoid this obligation, we recommend that you engage a cleaning service. You will lose both the control over who is sent to your home and lose your payroll tax obligations. Examples of such firms are Merry Maids, the Maid Brigade, Jiffy Maids, Molly Maids * - you can locate by Googling "home cleaning service YourTown YourState." When you hire a service, you make your payments to Cleaning Services Inc. or Cleaning Services LLC - and not to Mary Jones.
* Provided for illustration only - HomeWork Solutions does not specifically endorse or recommend any particular home cleaning service.