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, and gardeners. Independent contractors such as repairmen, carpenters, and plumbers are not considered household employees.
The IRS doesn't require an employer to withhold federal income tax from a household employee's wages, but if the employee asks to have it withheld, the employer can.
Understanding Household Employees
The Internal Revenue Service (IRS) distinguishes between household employees and independent contractors based on whether the employer or 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 childcare 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.
Examples of Household Employees
If the worker is an employee it does not matter if whether the work they perform is full time or part-time or if 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 employees work and provide all services at their employer's place of residence.
- The IRS sees a household employee as having work decided by an employer and an independent contractor as having work defined by the worker.
- Nannies, babysitters, housekeepers, and gardeners are all considered to be household employees.
Special Considerations: Taxes
As of 2019, 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 2019, 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.