When you hire an employee or team of employees to work in your home, you become a household employer. That means you’ll need to get your employee’s payroll set up for weekly, bi-weekly, or monthly payment, and plan for tax withholdings.
As an employer, you have important legal responsibilities to be aware of.
Employment Laws and Regulations
Hiring an employee to work in your home means you need to have a legal, written record of their employment with you.
That means you can’t pay them under the table; you need to withhold the proper taxes for them. If you don’t, you could be subject to hefty fines or fees for tax evasion.
Your household employee is not an independent contractor. Independent contractors have no restrictions on their employment and set their own hours and job duties.
If you have specific duties and expectations for your employee, especially when it comes to working specific dates and times, they are an employee and need to be paid as one.
Visa and Work Permit Requirements
If you hire a domestic worker, you’ll likely need to complete Form I-9, Employment Eligibility Verification, for the domestic worker except in some instances. This form confirms that your employee is legally authorized to work in the United States.
The employee also must provide documents to certify their identity such as:
- A valid driver’s license
- Current passport
- Social security card
- Birth certificate
The I-9 form must be signed on the first day of employment and filed electronically within three days of when the employee began work in your home.
United States Citizenship and Immigration Services states that you do not need to complete a Form I-9 for the domestic worker if they are:
- Providing services that are sporadic, irregular, or intermittent; or
- Employed by a domestic service company (for example a maid service) or agency employing temporary domestic workers.
If you know that a domestic worker is not authorized to work in the United States, you are not allowed to employ them.
Tax Obligations and Compliance
Being a household employer requires you to follow tax guidelines, and that means completing and submitting the right paperwork that remits the proper amount of taxes from each paycheck.
Here are some forms that you will need:
- W-4: This form is given to your employee so all federal income tax is withheld properly from their pay.
- New hire report: Hiring someone to work in your home means you will need to file a ‘new hire report’ with the labor department of your state.
- Form 1040-ES: When it comes time to pay your portion of your employee’s Medicare and Social Security taxes, federal unemployment and federal income taxes, you will need to fill out this form. Most employers complete these taxes quarterly, so you don’t have to pay the full amount all at once when you file your personal tax return.
- Schedule H: This is a form that is attached to your personal tax return, and it allows you to report household employment taxes to the IRS.
Fair and Legal Pay Standards
The concept of fair and legal pay is simple: domestic employees need to be paid a livable wage for all the hours they have worked – including overtime hours.
It also means that as the employer, you will need to pay the correct employment taxes on the wages paid to the employee, with a verifiable income. Verifiable income allows the employee to purchase or rent a home, apartment, or vehicle.
By being paid legally, household employees are also eligible for government benefits like unemployment, disability, social security, or medical leave.
At Household Staffing, we understand that managing and understanding the various parts of payroll and taxes for your employee can get complicated and time-consuming. Our partnership with payroll agencies that specialize in household staffing details allows you to set your employee up the right way, so you can have peace of mind knowing everything is covered.
We recommend:
HomeWork Solutions
With more than a half-million tax returns processed, HomeWork Solutions is the reliable choice for household payroll and tax compliance. We specialize in providing comprehensive nanny payroll services, including tax, payroll, and HR solutions. Our mission is to ensure accurate and timely filing of payroll tax returns, eliminating any worries about notices, penalties, or red tape.
GTM Payroll
GTM Payroll Services has specialized in easy-to-use payroll solutions ever since our founding in 1991. Our success and client satisfaction is based on our industry-leading expertise, and an extraordinary level of personal attention to each and every customer. Today, we process more than $1 billion in payroll every year for more than 44,000 employees who work for businesses and families across the country.
