Have you recently hired your first household employee? Not too long ago, it was normal to have someone to help with simple tasks around the house like childcare, cleaning, and driving. Flash forward to modern times: the tradition isn’t all gone! Today, we breakdown the current rules and regulations for having a household employee (Publication 926).
Defining “Household Employee”
A household employee has two main requirements: (1) they must do household work (2) they must be your employee. Sounds simple enough, right? Maybe not. Household work includes a few key details like the work must be specifically of a household nature and the work must take place in your home. In terms of the “your” employee part, this simply means the individual isn’t self-employed, but rather, employed by you. The IRS website provides these examples of roles that could qualify as household employees:
House cleaning workers
Who is NOT a Household Employee
Three main exceptions to the household employee requirements exist, but even these have special exceptions depending on certain situations. The main consensus is that your spouse, your child, your parent, nor someone under the age of 18 can not be considered your household employee. However, here are a few exceptions to those rules:
1. Your Parent
Your parent could be a household employee for your child, your adopted child, or your stepchild who is under the age of 18 or if the child has a physical or mental condition that requires adult personal care for at least 4 continuous weeks. In addition, if you are divorced and not remarried, a widow, or living with a spouse with mental or physical conditions preventing them from caring for the child for at least 4 continuous weeks, your parent could be hired as a household employee.
2. Someone under age 18
If you hire a minor (e.g. an individual under age 18) who is under 18 for any time during that year, you can only count them as household employees if that is their main occupation. If the individual is also a student, that is considered their principal occupation, and they cannot be considered as a household employee.
The IRS Breakdown for Hiring
The IRS provides a checklist of questions and things to consider when hiring a household employee, but let's go through the basics:
1. Make sure the person can legally work in the United States, and ask about the need to withhold and pay both federal and state taxes.
2. When paying your employee, make sure to withhold social security tax, Medicare tax, and federal income tax. Keep detailed records of these, and decide how tax payments are made.
3. Be sure to get an EIN (Employer Identification Number), give your household employee the appropriate tax forms, and work with your accountant to ensure you’re on the right track for when you file your taxes.
A little extra help never hurt anyone, and a household employee may be a huge help for your busy life. Additional questions? Call us at Practical Accounting Solutions today!
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