Wage Test
Wage Test
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Domestic Employee Wage Test Steadily Increases
HomeWork Solutions, Inc., November 2011
Effective for calendar years 2009, 2010 & 2011, the wage test that obligates the nanny employer (or any household employer) for the withholding and remittance of Social Security and Medicare taxes is $1700 of wages paid in the calendar year. This wage test will rise to $1800 of wages paid in calendar year 2012.
Legislation enacted in 1994 dramatically modified the tax code, changing both the way the household employment taxes are remitted to the IRS, the potential penalties for non-compliance, and the amount of wages paid to obligate the employer for the remittances. Congress made provisions for periodic adjustments of the wage test that obligates the household employer to remit Social Security and Medicare taxes on wages that they pay their household workers. Until 1994 the wage test obligated employers who paid a household worker $50 or more in a quarter to Social Security and Medicare (FICA) taxes. The table below gives the historical values.
| Year | Annual Wage Test Amount |
| 2012 | $1800 |
| 2011 | $1700 |
| 2010 | $1700 |
| 2009 | $1700 |
| 2008 | $1600 |
| 2007 | $1500 |
| 2006 | $1500 |
| 2005 | $1400 |
| 2004 | $1400 |
| 2003 | $1400 |
| 2002 | $1300 |
| 2001 | $1300 |
| 2000 | $1200 |
| 1999 | $1100 |
| 1998 | $1100 |
| 1997 | $1000 |
| 1996 | $1000 |
| 1995 | $1000 |
| 1994 and earlier | $50 in any calendar quarter |
Household employers are NOT obligated on the federal level to deduct or withhold Federal income taxes from their household employee's wages. Most, but not all, states follow the federal rules.
Household employers have a second wage test to determine whether they are subject to mandated unemployment insurance tax contributions. Household employers are subject to the Federal Unemployment Tax (FUTA) when they pay their workers $1000 or more in any calendar quarter. State obligations, separate from FUTA, are triggered at levels between $500 - $1000 in quarterly wages.
Household employers reconcile their federal employment tax obligations annually on IRS Form 1040 Schedule H. A Form 1040 Schedule H must be prepared for any year when either the annual Social Security/Medicare wage test threshold was met and/or the FUTA threshold was met. Generally, remittance of the employment taxes must be made periodically through out the year, either by estimated tax payments or increased withholding from the EMPLOYER's pay check.
Employer's with questions about their employment tax obligations may contact HomeWork Solutions directly at 1-800-NANITAX. A representative will be available to assist you.
