Am I a Household Employer?

When hiring for one of these positions, payroll and tax procedures probably aren’t top of mind, and you think that you’ll pay cash under the table. Below we explain what makes you a household employer, what you need to know for payroll, and how to get help if you need it.

Am I Household Employer?

You are considered a household employer in the eyes of the IRS if:

• You pay wages of $2,200 or more in the calendar year
• You determine the type of work and when this person will complete the work

Being a household employer means that you must follow proper payroll and tax procedures, similar to another business. You are responsible for following a payroll schedule, withholding Social Security and Medicare taxes from your employee’s paycheck, and reporting these wages to the IRS. The taxes you are required to pay are called “the nanny tax”; these taxes apply even if your household employee is not a nanny.

Due to COVID-19, many families have turned to new options for childcare. Learning pods and nanny shares, and private teachers or tutors have all been trending due to eLearning and work from home schedules. If you have hired for any of these positions recently, you need to stay on top of payroll. The only exceptions for the nanny tax are if your nanny or household employee is:

• Your spouse
• Your child under the age of 21
• Your parent
• Any employee under the age of 18

How to Handle Household Payroll

As we mentioned, your journey is a household employer requires you to follow similar guidelines as a traditional business. To get started, you’ll need:

• Form W-4. Form W-4 is the form your employee fills out to indicate how much they would like withheld in payroll taxes. This form will also have their personal information, which you’ll need when it comes to tax season prep.
• A payroll schedule. There are four types of payroll schedules: weekly, biweekly, semi-monthly and monthly. These schedules dictate when your employee will get paid. You’ll want to check with your state for guidance because while some states let employers choose their preferred schedule, others will tell you which schedule to follow.
• Accurate timekeeping. Traditionally, most household employees are paid hourly. While some household employees may have a fairly consistent schedule, others like nannies and private teachers might have variable hours, especially due to changes with eLearning and hybrid models. Have an accurate timekeeping system in place to make payroll easier.
• Schedule H. If you do pay cash wages to your household employee, you’ll attach Schedule H to your personal tax filing to report household taxes. For more information, check out this page on Schedule H and Form 1040 on the IRS.

How Household Employers Can Get Help

If this is your first time finding out you are a household employer, you might be a little overwhelmed, which is fair given the complexities that come with payroll and taxes. The good news is you don’t have to go through it alone. Online payroll services for nanny payroll can be a huge help while you’re navigating being a household employer. You’ll want to do your research because not all payroll providers are created equal.

Bottom Line

The start of any new routine or working relationship takes some time to get used to. While you’ll have a lot of questions in the beginning of your household employer journey, you should eventually reach a point where things are a bit easier and you’re in a good flow. While payroll isn’t a task you can set and forget, with a little practice and adjusting, it is something that gets easier to manage.