Nanny tax. For purposes of federal tax, employers must withhold and pay FICA taxes
(7.65%) if they paid a household employee cash wages of at least $2,000
in 2016 or in 2017 ($2,100 in 2018). Employers must pay FUTA tax (6%) if
they paid total cash wages of at least $1,000 in a calendar quarter to
household employees. A homeowner may be an “employer” to a housekeeper;
or, if enough evidence is shown, merely a recipient of services by an
independent contractor or self-employed individual.
“Employer” status. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. If the individual who works in your home is self-employed and you do not direct him or her on specific tasks, you aren’t liable as an employer – a difficult hurdle to overcome in the case of childcare. Usually, you aren’t a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business.
If you use a placement agency that exercises control over what work is done and how it will be done by a baby-sitter or companion who works in your home, the worker isn’t your employee. This control could include providing rules of conduct and appearance and requiring regular reports. In this case, you don’t have to pay employment taxes. But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee.
Employer responsibilities. If you have a household employee, you may be subject to: