How to Handle Your First Year-End as a Household Employer

Whether you hired a nanny, private teacher, caretaker, gardener, or other household employees, there are some important things you’ll need to know for the end of the year. Below, we break down everything you need to know for your first year-end as a new household employer.

Year-End Payroll Tasks

Whether you are handling your household payroll on your own or working with an online payroll service, there are some payroll tasks you need to be aware of at the end of the year.

• Extra payrolls. If you plan to give your household employee a bonus or some other form of holiday pay, you’ll need to plan to run an extra payroll or two. While cash is king, it’s important to treat these extra payrolls like a regular paycheck and withhold payroll taxes. Failing to do so can cause problems during tax season.
• Bank holidays. A bank holiday is a day in which financial institutions are closed. If you pay your household employee via direct deposit and payday falls on a bank holiday, you’ll need to process payroll a day earlier so employees are paid on time.
• Preparing W-2s or 1099s. Depending on how you pay your household employee, you’ll have to give them a W-2 or 1099 by January 31^st. Before the year ends, review important employee information, including social security numbers, employee name (if they got married in the year this could have changed), and address. Doing this check before the new year can help prevent problems when your employee needs to file personal taxes.

Payroll mistakes can happen any time during the year, but the risk can increase at the end of the year because there are many moving parts and changes. To help with other payroll tasks and watch out for mistakes, we’ve compiled a list of five payroll mistakes that happen at year-end.

Understand Schedule H

While you could figure out Schedule H in the new year, it doesn’t hurt to get familiar with this important tax form now. Schedule H, Household Employment Taxes, is a form that household employers use to report household employment taxes to the IRS. Essentially, as a household employer, you are reporting how much you paid your household employee in the year. If you file personal income taxes, you can file Schedule H with form 1040.

How to Get Help with Payroll at Year-End

If you’ve been handling payroll on your own this year or are working with a payroll service thinking of switching, the end of the year is a great time to make that change. If you plan to keep the same household employee into the new year, switching online payroll services at the end of the year means you don’t have to enter wages from the past year. Additionally, when working with a nanny payroll service, they can help guide you through the year-end process by providing you form W-2/1099, ensuring that you pay your employee accurately and on time, and send you reminders of bank holidays.

Bottom Line

Getting through your first year-end as a household employer can be overwhelming, but thankfully there are plenty of resources available when you need help. Outside of nanny payroll services, you can always work with an accountant or bookkeeper to guide you through year-end. As an added bonus, they can also help you get ready for your first tax season as a household employer.