Domestic Help and Household Employment Taxes
68012
Home & Family > Kids
Feb 25, 2008
perrone
Domestic Help and Household Employment Taxes
After attending an APNA (Alliance of Professional Nanny Agencies) conference in Destin, Florida, it became apparent to me that household payroll taxes are becoming more of a talked-about issue. Although most people who hire household staff would still prefer not being troubled by the nuisance of figuring out the taxes and paying the extra amounts necessary to hire a nanny our housekeeper, there are a number of converts who understand the importance of doing so. If you are a household employer who is still unsure about the process, consider the following: What is a Household Employer? A household employer is defined as someone who pays an individual $1,500 or more in a calendar quarter to perform duties in or around their home on a regular basis. An example of a household employee would be a nanny, housekeeper, cook, home health aide and a private nurse, to name a few. The other important issue is how much control you as the employer have over the employee from a management standpoint. For example: if you determine the work hours, where the employee works, and what their responsibilities are, you would be considered a household employer. On the other hand, an employee can be considered an independent contractor if this person has an office elsewhere, comes to work with tools (cleaning equipment, etc.), and works unsupervised for many different people. Now that you have determined that your employee is not an independent contractor and you are a household employer, what does this mean? As an employer of a household employee, you are responsible for withholding taxes and remitting them to the tax agencies throughout the year. Your employee's wages fall under the Federal Insurance Contribution Act (FICA), so a portion of the wages you pay must be withheld and paid as Social Security and Medicare taxes. Both you and your employee are required to pay a percentage (7.65%) of the employee's gross wages. If you want to pay the entire amount yourself, you can do so and list the employee's share as n additional taxable gross income. In addition, there are State and Federal Income taxes that may or may not be withheld depending on the agreement between you and the employee. If you do withhold these taxes, you need to refer to your state's withholding guidelines. You will also need to pay Federal and State Unemployment Tax. What are the advantages to doing payroll taxes on my household employee aside from the fact that it is a legal requirement by law? There are a few advantages to doing the right thing. First of all, you can pay your employee with pre-tax funds through a Dependent Care Assistance Plan (DCAP) that is a tax-exempt fund that your employer would offer as a benefit. This plan allows you to contribute up to $5,000 of your pre-tax earnings to an individual Dependent Care Account. The money in this account is then used to cover dependent care expenses free of taxes. For those who do not have access to a Dependent Care Account, you may claim a tax credit for Child or Dependent Care on your income tax return at the end of the year. You can take a tax credit of 20% to 35% of qualifying childcare expenses up to $3,000 for one dependent or up to $6,000 for two or more dependents. (Only one of these tax savings options may be used each year.) Keep in mind that you cannot take advantage of any of this unless you can prove that you have an employee on payroll. So now that you more or less understand what is required of you as an employer of a household employee, where can you turn to have someone do this tedious task of payroll taxes for you? There are a number of companies who do this type of payroll tax service, but only a few companies specialize in the "nanny payroll tax". They make this part of being a household employer - simple and hassle-free.
Marta Perrone, author of How to Find, Hire, Train and Maintain Household Help. Free report: Top 10 Mistakes Household Employers Make When Recruiting Help. http://www.domesticpublications.com, http://domestic-connections.com, http://martaperrone.com
send email to perrone
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links at Home & Family > Kids
This article deals with keeping children and teens safe online using technology that monitors chat rooms, emails, and instant messaging. The idea is for parents to be on top of potential online dangers that are very real and to be able to avoid bad situat
Category:
Drug abuse is not only seen in adults, it is also seen more and more in young teens. The problem seems to escalate every day.
Category:
The Race Across America (RAAM) is a 3053-mile race across the country beginning in Oceanside, CA and ending in Atlantic City, NJ. RAAM is known as the world?s toughest event. Through deserts and over mountains, in conditions that will range
Category:
Today's society places emphasis on the outward appearance of our bodies more than ever before. Our society places a high value on the idea of being impossibly thin. A recent study has shown that the majority of the models we see in print ads and on TV are
Category:
Site Sponsor
Directory Statistics
Articles: 68252
Categories: 501
Yahoo Entertainment
