Defining Household Employees
A household employee refers to someone who receives wages in return for providing a service within their employer’s residence.
According to the IRS, if you control what work is done by the worker and how it is done, that worker will be considered your employee.
Work done in or around your residence is considered household work. The following types of workers are typically treated as household employees for employment tax purposes:
- Babysitters (with some exceptions)
- Eldercare providers or elder caregivers
- Private nurses
- Health aides
- Housekeepers or house cleaners (but not independent cleaning companies)
- Drivers or chauffeurs
- Yard workers (but not independent landscape companies)
- Other domestic workers
When Workers are Not Employees
A worker is considered self-employed and not an employee if they have control over how the work is done. Also, self-employed workers generally work with their own set of tools and offer services to the general public as independent business people.
If an agency provides you with the worker, then the agency itself controls what work is done and how and when it is done. In that case, the worker is not your employee.
If a worker offers child care services for you in their own residence, they typically would not be considered your household employee.
Freelance workers or independent contractors like plumbers, repairmen, and other business professionals are also not your household employees.
Let’s say you made an agreement with John Smith to maintain your lawn. John runs a lawn care business and offers his services to the public. He works with his own supplies and tools, and he hires and pays any additional helpers if needed.
Neither John nor his helpers would be considered your household employees. On the contrary, John would be an independent contractor, someone running his own small business, because he has his own tools, hires his own employees, and maintains your lawn in a manner he decides on a schedule he sets.
Who does the IRS consider a Household Employee?
As mentioned earlier, the IRS differentiates between independent contractors and household employees based on whether the taxpayer/employer can control not only the work that is done but how and when it is done.
If the worker alone determines how they work, they are considered to be self-employed, not a household employee. These self-employed workers generally offer their services to the general public as independent contractors and they provide their own tools and set their own work schedules.
The location where the worker operates may also determine whether they are self-employed or your employee. For example, if a childcare worker performs their duties in the employer’s residence they will be considered a household employee. But if they perform \these duties in a daycare center, which has published hours of operation and cares for other children as well, they would be considered an employee of that daycare center.
In addition, if a worker is an employee then it doesn’t matter whether they work on a part-time or a full-time basis. It also doesn’t matter if they get paid on an hourly, daily, weekly or per-job basis. Likewise, it doesn’t matter whether you found the worker via a list provided by a labor organization or hired her from an employment agency.
Household Employee Taxes
As of 2023, if a person or family pays $2,600 or more in cash wages to a household employee, they must also withhold and pay Medicare and Social Security taxes for this employee (FICA), as well as federal unemployment taxes (FUTA). The combination of these taxes is commonly known as the ‘Nanny Tax’.
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