How to Deal With Taxes for Household Help
- 1). Determine if the person you hired to do household work is your employee. If you can control not only what work the person does but also how they do the work, then the person is your employee regardless of whether you pay him/her by the hour, the day, the week or the job. If the person provides you with childcare services in her home, she is generally not your employee. If you hire the person through an agency and the agency controls how the person will do the work, then the person is not your employee. If the household help is your employee, continue to step 2. If the person is not your employee, you have no tax responsibility.
- 2). Obtain a completed Form I-9, "Employment Eligibility Verification." no later than the day your employee starts work for you. This form documents the employee's eligibility to legally work in the United States. You do not need to submit this form to the IRS, but you must keep it for your records and be able to produce it if the IRS audits you.
- 3). Withhold 7.65% from the wages you pay to your employee for Social Security and Medicare tax. You will pay this money to the IRS when you file your annual tax return.
- 4). Prepare a Form W-2, "Wage and Tax Statement," to report your employee's wages at the end of the calendar year. Give copies B, C, and 2 to your employee by Jan. 31. Send copy A to the Social Security Administration by Feb. 28. Keep copy D for your records.
- 5). File Schedule H, "Household Employment Taxes," with your annual 1040 tax return. Use this form to calculate the total household employment taxes you owe.
- 6). Add the household employment taxes you owe per Schedule H to your income tax liability on Form 1040.