Client Alerts The Nanny Tax Is Not Just for Nannies: Who is Considered a Household Employee?

Publication
12.17.20 | By: Joyce Carlson

As many of us look forward to putting 2020 in the rear view mirror, an inclusive punch list of items needed to support, process and file your personal tax returns includes information on any household employees. A shifting trend towards working from home may impact household worker roles by either downsizing –  or actually expanding – their employment landscape.

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As many of us look forward to putting 2020 in the rear view mirror, an inclusive punch list of items needed to support, process and file your personal tax returns includes information on any household employees. A shifting trend towards working from home may impact household worker roles by either downsizing –  or actually expanding – their employment landscape.

Who is Considered a Household Employee?

The nanny tax is not just for nannies.  Any individual who is paid to provide a service within your residence may be deemed a household employee. Examples of these types of household employees include nanny, babysitter, caregiver, housekeeper, personal assistant and/or gardeners.  Independent contractors, such as plumbers, repairmen and landscapers, are not considered household employees.

Related Read: Your Responsibility When Hiring Household Help

Determining guidelines include the following:

  • Household employees perform all services at your place of residence;
  • As their employer, the work that they do is decided by you; and
  • Notable for this year, tutors are not considered household employees.

Tax Considerations

Individuals who hire household employees and pay them more than $2,100 in wages for the year must pay Social Security, Medicare, federal and sometimes state unemployment taxes.

In addition to registrations, highlights of the tax requisites are as follows:

  • As of 2020, all new household employees must fill out the revised W-4. Those hired before 2020 do not need to fill out a new form.
  • Depending on state requirements, an unemployment form may need to be filed. Illinois requires a UI-HA Report for Household Employers form for wages paid unless they fall below $2,200 annually or $1,000 quarterly. 
  • An annual W-2 form filed and provided to an employee for wages paid unless earnings are under $600.
  • Inclusion of household tax information on Schedule H of your personal tax return.

Next Steps

Be proactive. Supplying information prior to year-end will ensure a smooth and timely filing of employment-related activities. We normally ask you to provide your tax information as early as possible every year. In anticipation of inconsistencies and variable new work and employment patterns for 2020, priority is given to address any one-time or ongoing shifts that may occur at the household level.

Please review your records for the following information:

  • Employee W-2 information, including names, addresses, social security/ID numbers.
  • Salary amounts, worksheets or calculations.
  • If this is your first time filing as a household employer, you will need to provide additional information.

If you have questions about who qualifies as a household employee or the requirements to file personal returns with household employees, please contact us.

For more information, contact Joyce Carlson at jcarlson@orba.com or 312.670.7444. 

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