What is a Household Employee
A household employee is an individual who is paid to provide a service within their employer's residence. Employers choose what kind of work a household employee does and how they will do it. Some examples of household employees (or household workers) include babysitters, nannies, housekeepers and gardeners. Independent contractors such as repairmen, carpenters and plumbers are not considered household employees.
Breaking Down Household Employee
The Internal Revenue Service (IRS) 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. If the worker decides how they work and how a job is done they are considered to be a self-employed worker, not a household worker. Such individuals provide their own tools and offer their services to the public as independent businesspeople.
Where someone works may decide whether they are a household employee or an independent contractor. For example, a child care worker who performs their duties in an employer's home may be a household employee. But a worker who performs the exact same services in a daycare center would be employed by that daycare center. For more, see: Hiring Household Employees from the IRS.
Household Employee Examples
If the worker is an employee it does not matter if whether the work they perform is full time of part time or of they were found and hired with the use of an employment agency or via a list provided by an agency or labor organization. Household workers may be paid on an hourly, daily, weekly or per-job basis. Some common examples of household workers include the following: babysitters, caretakers, cleaning people, domestic workers, drivers, health aides, housekeepers, maids, nannies, private nurses, and yard workers.
Household Employee: Taxes Considerations
As of 2018, individuals who hire household employees that they pay a total of more than $2,100 in cash wages 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." As of 2018, the withholding amount for Social Security taxes is 6.2% and the sum for Medicare taxes is 1.45% for a total of 7.65% total withheld from all cash wages. The employer also must match that 7.65% out of their own pocket, also for Social Security and Medicare. Some employers may choose to pay the total 15.25% withholding themselves. For more, see Topic Number 756: Employment Taxes for Household Employees from the IRS.