123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Business >> View Article

The Household Employee Problem

Profile Picture
By Author: Leon A. Elwell
Total Articles: 64
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

This often overlooked bookkeeping and payroll tax requirement can cause a tangle of tax problems if not handled correctly. It ended a run for Congress by Caroline Kennedy (JFK’s daughter) and killed a U.S. Attorney General nominee’s chances for appointment. Could you be impacted? This is what you need to know.

Nanny Tax Explained

In an effort to capture income from household employees, the tax code requires you to obtain employee information, pay the related state and federal taxes, and withhold taxes for anyone you employ around the house. The requirement comes into play if you pay any one individual $2,100 or more in 2019 (unchanged from 2018). You must then submit a W-2 for each of these “household employees”.

Who is Covered?

The household workers typically covered by this law include:

Employee or Not an Employee

Before you panic, first determine whether your help is an employee or not. If in the eyes of the tax code, your help is not an employee the nanny tax rules DO NOT apply. What does the IRS look for?

Who controls how the work is done? If the worker clearly does, ...
... then the person is self-employed and not your employee.
Whose tools are used? If the worker’s tools are used then they are more likely self-employed and not your household employee.

Work exclusively for you? If the worker has a number of customers then they are less likely to be your household employee.

Does an agency supply the worker? If an agency supplies the worker and controls what work is done and how it is done, the worker is not your employee.

Daycare services at an offsite location. If your childcare is conducted in the worker’s home, that worker is generally not your employee.
Some Suggestions

Have your help become incorporated. The reporting rule only applies to hired individuals. If your household help is in anLLC or Subchapter S-Corporation, it is up to that company to employ the worker and pay their employment taxes.

Be aware of the annual limit. Make sure your total payments do not exceed the reporting threshold each year.

Determine if the hired help are truly employees or self-employed.
Rotate services. If you have help with yard work,consider employing a number of helpers to make sure no one person is paid above the reporting threshold.

Make the determination now. If you think you may have a household employee, ask for a review. Waiting until the end of the year can create a reporting problem for tax payments due during the course of the year.

Follow the IRS Checklist. If you know you are hiring a qualified household employee, here is a brief checklist provided by the IRS to help keep you out of harm’s way:

Find out if the person can legally work in the U.S. (form I-9)
Find out if you need to pay state taxes
Withhold social security and Medicare taxes
Withhold federal income tax if required
Determine if you are required to pay federal and/or state unemployment taxes
Determine the payment method and make tax payments
Get an employer identification number (EIN)
File W-2s each year and provide copies to your household employees
File household employment tax form with your annual tax return
Keep good records

Questions or concerns about tax situations when it comes to household employees? Let us help! Schedule a free consultation call and we’d be happy answer any questions you have: https://www.bas-pc.com/appointment-center/

Get More Info :Visit Here : https://bas-pc.com/

More About the Author

Business Accounting Systems, P.C., is a South Jersey Public Accounting Firm located in West Deptford, New Jersey that has been providing excellence in servicing the accounting, payroll, and tax needs of independently owned small businesses throughout the Tri-State area. For More Info : Visit Here : https://www.bas-pc.com/

Total Views: 154Word Count: 548See All articles From Author

Add Comment

Business Articles

1. Single Screw Plastic Extruder Demystified For Manufacturers
Author: ADVAN

2. Leed And Its Impact On Today's World
Author: Agile Advisors

3. Enhancing Safety And Sustainability: Tempgenius Blood Bank And Environmental Monitors
Author: Chris Miller

4. Verg Restoration
Author: PAVEL VERGULYANETS

5. Key Players And Competitive Landscape In The Insect Pest Control Sector
Author: MarketsandMarkets

6. Earthing Rod And Its Types
Author: EARTHING ROD AND ITS TYPES

7. Unveiling Excellence: The Journey Of A Pcb Manufacturer And The Innovations In Rigid-flex Pcbs
Author: Shenzhen Shuoqiang Electronics Co.,Ltd.

8. Exploring Multilayer Pcbs, Aluminum Base Pcbs, And Choosing The Right Pcb Supplier
Author: Shenzhen Shuoqiang Electronics Co.,Ltd.

9. Best Wati Alternatives In 2024 To Improve Customer Engagement
Author: Vilas

10. Revolutionizing Retail Spaces With Architectural Cad Design And Drafting Services
Author: Pavantheaecassociates

11. Professionell Diskning I Stockholm: Ta Hjälp Av Erfarna Diskare
Author: hemstandind i sigtuna

12. Canva Acquires Design Platform Affinity To Bring Professional Design Tools To Every Organization
Author: otis

13. Best Static And Dynamic Website In Mumbai
Author: Techstreat Web Solutions

14. Mastering The Road: The Essential Training For Becoming A School Bus Driver With Northstar Bus Lines
Author: Northstarbuslines

15. Exploring The Potential Of Hydrogen Technologies: A Clean Energy Revolution
Author: yogitamnm

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: