A good domestic worker can help take care
of your children, assist an elderly parent, or keep your household running
smoothly. Unfortunately, domestic workers can also make your tax situation more
complicated.
Domestic workers of all types generally fall under the "nanny tax" rules. First, you must determine whether your household helper is an "employee" or an "independent contractor." If you provide the place and tools for work and you also control how the work is done, your helper is probably an employee. For example, at one end of the spectrum, a live-in housekeeper is probably an employee. At the other end of the spectrum, a once-a-month gardening service may qualify as an independent contractor.
If your household worker is an employee, then you, as the employer, may
be required to comply with various payroll tax requirements. For the years 2014
and 2015, the important threshold amount is $1,900. If you pay your employee
$1,900 or more during either year, you are generally responsible for paying
social security and Medicare taxes on your worker's wages. In addition to
social security taxes, you may be required to pay federal and state
unemployment taxes as well as other state taxes. With these taxes go various
deposit and filing requirements, including the requirement that you provide
your employee with an annual W-2 form that shows total wages and withholding.
February 2, 2015, is the deadline for providing W-2 forms to workers to whom
the nanny tax applies for 2014.
As you might expect, most people need assistance complying with the
nanny tax rules. If you need details about the rules or help in dealing with
them, contact our office at (518) 798-3330.
