Domestic Workers and Taxes

If you hire someone to work in your home, such as a nanny to watch your children, a gardener, or anything in between, you immediately become what is known as a “household employer.” As such, you have to follow the laws that govern how employees should be treated and taxed.  

FICA Taxes

To start off with, you should be aware that, in some situations, you will need to pay FICA taxes for your domestic workers.

The rule is that if you pay your household worker more than $1700 per year, you have to pay FICA taxes on that worker. Not doing so can get you in serious trouble, so find out if you’re required to pay FICA taxes and, if so, talk with a tax adviser to learn how to determine and pay your FICA tax amount.

Paperwork

In addition to paying all the right taxes, you also need to complete all the right paperwork when you make the decision to hire a domestic worker or workers.

A few of the things you’ll need to take care of, paperwork-wise, include getting a federal employer identification number, verifying that your employee is eligible to work in the United States via Form I-9, and registering with your state as an employee.

All of that may seem like a lot to handle, but it’s all necessary if you want to have people working in your home, and the good news is that a tax professional can easily walk you through all of the paperwork and even do some of it for you.

As you can see, there’s a lot of work that goes into hiring and having domestic help. However, it’s well worth it in the end! Just find a qualified financial professional to help you legally hire and pay your household employees, and everything should go smoothly!