Social Security and Medicare Taxes for Household Employees
The Income Test for Social Security and Medicare Taxes Remains at $2,600 for 2023.
You do not have to withhold or report Social Security or Medicare taxes for household employees that you pay less than $2,600 this year. The FUTA annual threshold remains the same at $1,000.
Caregivers to whom you pay $2,600 or more, but who are age 17 or younger, are not considered household employees for whom you must withhold and pay FICA taxes unless providing household services is that person’s principal occupation. If the caregiver is a student, providing household services is not considered to be his or her principal occupation.
Wages you pay to your spouse to care for your child, or to your parent or child under age 21, generally do not count as FICA wages for which you are obligated to withhold and pay tax. There are some exceptions to this general rule. If your spouse, parent, or one of your other children provides paid caregiver services to you, see Publication 926 for more details.
Household Employers Are Subject to Possible Estimated Tax Penalties for Underwithholding
Consequently, you may have to pay an estimated tax penalty if you do not have enough federal income tax withheld from your own pay to cover your household employment taxes for the year, or, if you are self-employed, do not make sufficient quarterly estimated tax payments to cover your household employment taxes as well as your personal income tax which will be due by April 15 of next year.
To ensure you do not incur a penalty, you can either increase the federal income tax your own employer withholds from your pay or increase your existing quarterly prepayments made with Form 1040-ES if you are self-employed. Even if you are not self-employed, you also have the option of making quarterly estimated prepayments of your household employment taxes using Form 1040-ES [Estimated Tax Payments for Individuals].