The household employee tax isn’t all that different from other types of employee payroll taxes. You, the employer, and your household worker, the employee, will be responsible for paying federally-mandated FICA taxes, which is 15.3% of the employee’s wages. There may also be applicable local and state payroll taxes. What is different are the forms and the type of employers who are responsible for reporting these payroll taxes and employer-based filing forms.
Put another way, just because your hire a nanny, maid, butler, or chef doesn’t necessarily mean you’re experienced business owner or accounting professional. To simplify the reporting rules for this type of employment, the IRS has employers use Schedule H Form 1040 to document household employee tax and income payments as part of their end-of-year filing forms.
Who is a Household Employee?
With this in mind, long before you fill out and file Schedule H Form 1040, there are things you should do when you first hire a household employee. First and foremost, you need to know if you’re actually hiring an employee or buying services from a consumer business. Whether it’s babysitting, house cleaning, or yard work, both employees and contract businesses are likely available for hire. There are a number of factors that determine the nature of this relationship. If it’s not immediately evident whether you’re a boss hiring an employee or a paying customer for a small business owner, you can use Form SS-8 to get an official ruling from the IRS.
When hiring an employee, you’ll first need to make sure the person can legally work in the U.S. using Form I-9. You’ll also want to determine how much of the employee’s pay to withhold for payroll and income taxes using Form W-4.
Industry and Cultural Standards
That said, the wider industry and cultural standards of household services impact more than just the classifications of workers as household employees. Unlike other industries, it’s not uncommon for the household employer to pay all the workers payroll taxes for them. It’s also important, though not required, to withhold your employee’s income taxes so they’re not hit with a huge tax bill at the end of the year.
Payroll Software Support
The best plan is to track your week-to-week and total household employee tax liability, but it’s also true that a lot of people procrastinate. Fortunately, the AMS Payroll module enables both Live and After-The-Fact payroll processing. The same goes for both paychecks and direct deposit payroll. In fact, with our Software Generated Forms module, you can even print your own MICR checks.
Of course, most people aren’t interested in producing their own bank checks just because they hire a household employee. In fact, if you take care of your own payroll and paycheck calculations, you may not need our Payroll module at all. For a lower price tag, you can get our Forms Filer Plus module with support for Schedule H Form 1040 and other basic employer/unemployment filing form support. Alternatively, you’re looking for more advanced e-file software support, we have that, too. Check out all our products and prices:
- W-2/1099 Forms Filer (required platform)
- Payroll Software
- Forms Filer Plus
- Software Generated Forms
- E-File Direct
- Affordable Care Act Filer
- 1042-S Filer
How to Get Household Employee Tax Software from AMS
You can buy and download these products at any time. You can also download our free demo to first see what our software has to offer. Still have questions? Call our Sales and Information team at (800) 536-1099.