1) Household Employer vs. “Regular” Employer
The federal government and most states differentiate between a household employer and a non-household employer. The advantages of being classified a household employer are;
- Federal filing requirements are simpler. Payroll taxes are filed and paid only once a year together with your personal tax return (Schedule H).
- You are not required to withhold federal or state income taxes.
A household employer is someone who employs persons to work in or around their primary residence. This is in contrast to non-household “regular” employers who typically hire employees who work outside their residence to help achieve a business’s objectives.
2) Who are household employees vs. non-household employees?
Workers who are household employees:
Household employees are hired to do household work and you can control not only what work is done, but how it is done. It does not matter whether the work being done is full-time or part-time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
- Babysitters, nannies, caretakers
- Drivers, chauffeurs
- Health aides, private nurses
- Cleaning people, housekeepers
- Yard workers, gardeners
- Crews of private aircraft or yachts
Workers who are non-household employees:
- Workers you get from an agency if the agency is responsible for who does the work and how it is done.
- Self-employed workers. A worker is self-employed if only he or she can control how the work is done. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.
3) Wage Thresholds
There are certain federal and state wage limits that have to be surpassed before any taxes have to be payed. What this means is even if you do meet the initial definition of a household employer the amount you pay your employee do not meet requirements for filing payroll taxes as an employer. For more information see Payroll Taxes.