Correctly managing your household tax and payroll is important. The Internal Revenue Service expects home employers to properly pay and file taxes for all household contract workers. To start, you must understand the IRS’ definition of a household employee for these types of workers. Part of your responsibility may be withholding an employee’s share of FICA tax from their wages. The FICA tax includes Social Security and Medicare taxes and is based on the Household Employer’s Tax Guide.
Advanced Micro Solutions’ software can significantly improve the way you report wages and pay your household employees. The software accommodates many types of workers and provides a noteworthy advantage. AMS’ W-2/1099 Forms Filer operates as a complete database system for household tax and payroll management. It generates W-2, 1099, and other forms. You can add on additional modules, including AMS’ Payroll, to complete your household employer accounting suite.
Steps for Paying Household Employees
Your family becomes an employer once you hire a household employee. You must classify the workers if they are housekeepers, drivers, health aides, or landscapers. After classifying them, complete specific tasks that enable you to pay the employees.
Get an Employer Identification Number
The IRS issues EINs, also known as a Federal Employer Identification Number, to employers. You do not need to pay a fee to get an EIN. You will need to get one to file household tax and payroll forms to the IRS and Social Security Administration.
Contact Your State Revenue Department
Register with the department so you can get your state tax identification number. Make sure to know if your state requires you to get two numbers. You should also confirm whether your state has a state income tax at all.
File Form I-9
Submitting Form I-9, or the Employment Eligibility Verification Form, is crucial for all employers. The form verifies your employee’s ability to work within the United States. You cannot pay your employee until both you and the employee fill out the form. Using tax software will help you to stay organized with these forms and other employee records.
Complete a State W-4 Form
Employers use state W-4 forms to accurately deduct state income tax from a household employee’s paycheck. Your state may use the form but classify it using another name.
How AMS Can Help with Managing Household Tax and Payroll
Our accounting and payroll software can streamline your responsibilities, especially if you are a new household employer struggling to get started. Getting your employer identification number is the first step as you prepare to hire a nanny or domestic worker. Keeping track of the forms and all the state and federal requirements also takes time.
You can customize AMS’ products to support your needs. The tax software permits easy form completion and management. You can also purchase the Software Generated Forms to save additional time and money. AMS Payroll calculates any state payroll taxes. Try AMS’ free demo or contact customer support to understand additional product features.