Household Employee


DEFINITION of 'Household Employee'

An individual who is paid to provide a service within a residence. Examples include babysitters, nannies and housekeepers. Independent contractors such as repairmen and plumbers are not considered household employees.

BREAKING DOWN '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 be required to pay taxes at the state level as well. These taxes on household employees are commonly known as the "nanny tax."

  1. Nanny Tax

    A federal tax that must be paid by people who hire household ...
  2. Social Security Tax

    The tax levied on both employers and employees used to fund the ...
  3. Payroll Tax

    Tax an employer withholds and/or pays on behalf of their employees ...
  4. Medicare Wages

    An employee's earnings that are subject to a U.S. payroll tax ...
  5. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  6. Corporate Culture

    The beliefs and behaviors that determine how a company's employees ...
Related Articles
  1. Personal Finance

    Ways To Slash Your Home Energy Bill

    Upgrading household appliances to more energy-efficient models can slash your utilities bill.
  2. Budgeting

    Kids Or Cash: The Modern Marriage Dilemma

    It now costs nearly $300,000 to raise a child for 18 years. Are you sure you're up for it?
  3. Professionals

    4 Ways Companies Can Relieve Workplace Stress

    Workplace stress can cost companies tons of money in lost productivity and absenteeism. Some of that is out of their control, but often they are the cause.
  4. Professionals

    Prevent Employees From Hacking You Computer System

    Cyber security attacks from a current or ex-employee can cause a lot of pain. Here is how to avoid such attacks.
  5. Entrepreneurship

    Hire Your Kids at Your Small Business – Here's Why

    And how to make sure you do it the right way, following IRS guidelines.
  6. Economics

    Explaining Silo Mentality

    A silo mentality occurs when certain departments in an organization do not share information or knowledge with other departments.
  7. Entrepreneurship

    What Does It Mean To Be Self-Employed?

    A self-employed individual works for herself instead of working for an employer that pays a salary or hourly wage.
  8. Savings

    5 Ways To Be Irreplaceable At Work

    Companies most value five certain behaviors, and the employees who exhibit them establish themselves as essential to an organization.
  9. Economics

    What is a Restricted Stock Unit (RSU)?

    RSUs are compensation in the form of stocks that an employer pays an employee according to a vesting schedule.
  10. Professionals

    How To Keep Millennials Motivated in the Workplace

    Millennials, ages 18 to 34, will soon make up most of the global workforce. What are the best ways to maximize their potential for top performance?
  1. When do I need to fill out an IRS Schedule H form?

    If you are a household employer who owes household employment tax, the IRS requires you to fill out Schedule H and include ... Read Full Answer >>
  2. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  3. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  4. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  5. What should a whistleblower do if their employer retaliates?

    Although specifically prohibited by employment law, employer retaliation against whistleblowers for exposing employers' wrongdoings ... Read Full Answer >>
  6. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!