I have to pay taxes for household employees?!

Your Guide to State, Local, Federal, Estate + International Taxation

Do you have someone who does work around the house for you? Do you know if they are a household employee? Did you know you have to pay taxes for household employees? You may be required to report and pay payroll and unemployment taxes.

“You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done.” – IRS (Click here for the website and examples)

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“Oh shoot!” you say? … You have a household employee? I thought so. Now what? Well, let us help you.

  • You are required to file Schedule H, “Household Employment Taxes” with your federal income tax return each year you have a household employee (Schedule H should be filed even if you aren’t required to file a federal income tax return).
  • Do you need to pay employment taxes (Social Security, Medicare and Unemployment)?
    • If you pay cash wages of $2,300 or more in 2021 you need to withhold and pay Social Security and Medicare taxes.
    • If you pay total cash wages of $1,500 or more in any calendar quarter of 2021 you must pay federal unemployment tax (Also Arizona unemployment tax if in Arizona).
    • You do not need to withhold Federal Income Tax unless the employee requests it.
  • Get yourself a FEIN number by applying online or filling out Form SS-4 because this is required for Schedule H. Oh look! A link to apply online, so convenient!
  • You and your employee need to fill out Form I-9 and send it in. Be sure to make a copy for your records.
    • Note that it is unlawful to employ a person who can’t legally work in the United States, so don’t ask us the ‘what if’ question, because you just can’t!
  • Arizonans will need to register with the Arizona Department of Economic Security to file and pay state unemployment taxes (Register here online.). You aren’t required to withhold state income taxes, so no A-4.
  • If you pay cash wages of $2,300 or more in 2021, then you are required to file W-2s and W-3s, which are to be mailed or provided to the employee by January 31, 2022, for the 2021 tax year.

Household employees might make things complicated, right (rhetorical question)? What a rough life! With that said, could you imagine cleaning the house!? Making your own meals!? Learning how to drive yourself places!? I don’t know how I would … oh wait, I do that every day! But for you, you may be too busy for that. So, if you’re fortunate (or unfortunate in some circumstances; I can think of a few) to have a household employee and have questions or concerns, please contact us. We’re happy to help you!

If you have more questions on how to pay taxes for household employees, contact your Henry+Horne advisor.

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