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Household employer taxes ("nanny tax") basics
When they apply, what's involved, and how families handle them.
If you pay a household employee more than a yearly threshold set by the IRS, you generally need to withhold and pay Social Security and Medicare taxes, and you may owe federal and state unemployment taxes. The thresholds change; IRS Publication 926 lists the current ones.
What's usually involved
- Getting an employer identification number (EIN)
- Withholding the employee's share of Social Security and Medicare
- Paying your share, usually with Schedule H on your own tax return
- Giving the employee a Form W-2 and filing it
- State registration and unemployment taxes, depending on your state
- Completing Form I-9 to verify work eligibility
Why it's worth doing
- Your employee builds Social Security and Medicare credits and can claim unemployment if the job ends
- It may let you use a dependent care FSA or the child and dependent care credit for childcare
- It avoids back taxes and penalties later
Getting help
Household payroll services can handle withholding and filings for a fee. A tax professional can answer questions about your situation.
General information, not tax advice. See IRS Publication 926 and your state's labor and tax agencies. House Help Crew isn't paid by any agency, marketplace or service mentioned here.