What is a Household Employee?

A ‘Household Employee’ as defined and explained by Investopedia.com, is an individual who is paid to provide a service within a residence.  Some examples include babysitters, nannies and housekeepers.  Independent contractors such as repairmen and plumbers are not considered household employees.

Investopedia explains ‘Household Employee’

The Internal Revenue Service distinguishes between household employees and independent contractors based on whether the employer/taxpayer can determine not only the work that is performed but how it is carried out.  As of 2010, individuals who hire household employees that they pay a total of more than $1,700 during the tax year must pay Social Security, Medicare and Federal Unemployment taxes on this employee’s wages and may also be required to pay taxes at the state level.  These taxes on household employees are commonly known as the ‘nanny tax.’

How do you know if you have a household employee?

If you hired a person to do household work and you direct them as to what their job is and how they perform their duties, this makes them a household employee.

The amount of hours worked does not matter.  Full time employees and part time employees who perform assigned duties in your household are in this category as well.

If you hire someone who works for you but under their own rules, with their own equipment and offers their services to other people or businesses, then they are considered self-employed.

1099-etc provides an easy to use software solution that will allow you to easily manage both household employees and independent contractors.

Software Solutions from AMS

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