A household employee is determined as an individual who is paid to provide a service within a residence. These types of service providers include:
- Babysitters
- Nannies
- Housekeepers
Independent contractors like repairmen and plumbers are not considered household employees. If you are looking to improve how you compensate these workers, you may need to get a payroll program that can accommodate employee and non-employee compensation.
Advanced Micro Solutions’ 1099-etc software is a stand-alone, base program or can be built into a full-accounting suite of tools with six optional add-on modules, including AMS Payroll.
Household Employee vs Independent Contractor
The Internal Revenue Service distinguishes between household employees and independent contractors based on whether the employer or taxpayer can determine:
- How the work is performed
- How the work is carried out
If you hire household employees and pay them more than $3,000 for 2026, you must pay Social Security, Medicare and Federal Unemployment taxes on this employee’s wages and may further 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 hire someone to do household work and direct them as to what their job is and how they perform their duties, it 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 the same category as well.
If you hire someone who works for you but does it with their own rules, then they are considered self-employed workers. These types of workers:
- Bring their own equipment
- Offer their services to other people or businesses
Our base W-2/1099 Forms Filer platform and optional add-on AMS Payroll module provide easy-to-use software solutions. Download our free 1099-etc Demo software today and see exactly how easy it is to manage household employees and independent contractors with a single platform.
Frequently Asked Questions
- Do I need nanny payroll software to pay household staff legally? – Avoiding potential liabilities and severe penalties is easier with payroll software. You do not want to find yourself unintentionally paying double the interest of back-paid taxes.
- What should I look for in household bookkeeping software? – Try not to limit yourself when it comes to getting comprehensive bookkeeping software, but keep in mind that you do not need bells and whistles either. Getting features like automation, access to state/federal tax tables, and access to tax liabilities can save you time and money.