Household Employees

HOUSEHOLD WORKERS PAYROLL - HOW TO COMPLY

How to collect, pay, and report payroll taxes

The Internal Revenue Service and the State Employment Development Department consider all household workers to be your Employees and you are liable for Social Security, Medicare, and federal and state unemployment taxes on the amounts you pay to them. They must have a Social Security or Taxpayer ID number and you must file payroll returns. An incentive is that the payments may qualify for tax credit. Check with our office for further details, forms, amounts and filing obligations specific to your situation.

You have a household employee if you hire someone to clean your house, take care of your children at home, provide elder-care for a relative who lives in your house, or if you have a full time groundskeeper or chauffeur. They are your employees because you control the work they do, when they do it and how it's done.

There are federal and state penalties for failing to file, filing late or under-reporting household payroll tax returns. Even if you have not been filing, it is important to begin doing so now. It is unlawful for you to knowingly hire or continue to employ anyone who cannot legally work in the United States and penalties can be up to $3000 for first offense.

If you pay household employees more than $750 in a calendar quarter, you need to:

1. Have an EIN number as a household employer.
   www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
2. Have a state of CA number as a household employer.
   edd.ca.gov/en/Payroll_Taxes/Household_Employer
3. Have the employee complete a Form W-4.
   www.irs.gov/pub/irs-pdf/fw4.pdf
4. Have the employee complete a Form I-9.
   www.uscis.gov/i-9
5. Withhold employee's portion of assessed Social Security, Medicare and state disability.
6. Pay the withheld employee's portion of their taxes along with your employer's portion to the IRS and state of CA. The payment due dates depend on the size and frequency of your payroll.
7. File quarterly and/or annual payroll return(s). Due Apr 30, Jul 31, Oct 31, Jan 31.
8. Provide employee with Form W-2 reporting the preceding year's wages and taxes withheld. Due Jan 31.

Follow these links for forms and more information

CA Employer's Tax Guide
edd.ca.gov/pdf_pub_ctr/de44.pdf

IRS Publication 15 Employer's Tax Guide
www.irs.gov/pub/irs-pdf/p15.pdf

EDD - Misconceptions of Employee v. Independent Contractor
www.edd.ca.gov/pdf_pub_ctr/de573m.pdf