If you have a housekeeper, maid, babysitter, gardener or other employee that you pay throughout the year, you may actually be liable for withholding taxes on their wages. Unlike service providers or independent contractors, household workers are technically your employees because you control the work they do and how they do it.
If you do have a household employee, there are some things that you have to do for your yearly taxes.
- First, you will need to get an employer ID. https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers
- Second, you will need to fill out an i-9 and a W-4 with the employee. https://www.irs.gov/businesses/small-businesses-self-employed/hiring-employees
- Third, you will have to withhold different types of taxes depending on how much you pay them. https://www.irs.gov/businesses/small-businesses-self-employed/understanding-employment-taxes
- Fourth, you will have to keep records of how much you pay throughout the year. https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-recordkeeping
Additional information on hiring household employees can be found at the following links:
If you want to opt out of this additional reporting, you do have an option. Instead of hiring an individual, you could pay a household employee service. The service would provide the employee to you, and they would take care of all of the payroll and tax reporting obligations. As you can imagine, hiring a business like this tends to be more expensive than hiring an individual, but with less paperwork.
Clergy Financial Resources discusses household employees as part of our 1040 review process. If you are still looking for a 1040 preparer, visit our website at https://www.clergyfinancial.com/services/clergy-tax-preparation/
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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