Do I have to pay tax for my household employees?
|
| If you employ someone in your home that does not work for an agency in an employee
relationship and you pay them cash wages in 2009 of $1,500 or more you may be required to
withhold and remit to the IRS Social Security tax and Medicare tax, known as FICA, and pay an equal amount
of tax from
your own funds. You may also have to pay Federal Unemployment tax to the
IRS, known as FUTA, and an
advance payment of the earned income tax credit if the employee qualifies and asks for it. |
 |
| Maximum Wages Subject to Social Security
tax |
$106,800.00 |
| Social Security
tax rate (Employee) |
6.20% |
| Maximum Social Security
tax (Employee) |
$6,621.00 |
| Social Security
tax rate (Employer) |
6.20% |
| Maximum Social Security
tax (Employer) |
$6,621.00 |
| Social Security
tax rate (Self Employed) 1 |
12.40% |
| Maximum Social Security
tax (Self Employed) 1 |
$13,243.00 |
| Maximum Wages Subject to Medicare
tax |
Unlimited |
| Medicare tax
rate (Employee) |
1.45% |
| Medicare tax
rate (Employer) |
1.45% |
| Medicare tax
rate (Self Employed) |
2.90% |
Footnotes:
1 Self employed persons are entitled to deduct one-half of their self
employment tax on Line 27 of Form 1040. |
|
|
|
|
FICA tax
does not apply to "household employee" wages paid to:
 | your spouse; |
| your child under age 21. (However, you cannot take a Dependent Care
Tax Credit for payments
made to a child under age 19); |
| your parents unless you are divorced or widowed, or your spouse is disabled; and you
have a child at home that is under age 18 or disabled; |
| your household employee who is under age 18 at any time during the
tax year so long as
he/she is not a full time household worker. |
|
|
|
| Maximum Wages Subject to FUTA
tax |
$7,000.00 |
| FUTA tax rate (Employer) 1 |
6.2% 2 |
| Maximum FUTA tax (Employer) 1 |
$434.00 |
Footnotes:
1Only the employer pays FUTA
tax.
2 The employer may also owe state unemployment tax. Employers who pay state unemployment tax, on a timely basis, will receive an offset credit of up to 5.4%, regardless of the rate of tax they pay the
state. Therefore, the net FUTA tax rate is generally 0.8% (6.2% - 5.4%), for a maximum FUTA tax of $56.00 per employee, per year (.008 X $7,000. = $56.00). State law determines individual state unemployment insurance tax rates.
For a table of current tax rates and taxable wage base information for individual states,
click
here. Under Significant Provisions of State UI Laws, from the drop down menus, select a period and select an issue. Then click Submit. |
|
|
You must
pay FUTA tax to the IRS if you pay your household employee $1,000 or more during any calendar
quarter of the tax year or if you did so during any calendar quarter in the prior tax year.
FUTA tax does not apply to "household employee" wages paid to:
| your spouse; |
| your child under age 21; |
| your parents. |
Report your FUTA tax on Form 1040, Schedule
H.
|
|
 |
Related tax
information about withholding for household employees |
|
|
| General Tax Questions |
|
IRS publications about
withholding for household
employees:
For specific information on household employment tax, see
IRS Publication 926, Household
Employer's Tax Guide. Also see
IRS Publication
17, Your Federal Income Tax. |
|
 |
|
 |
Ask Julian Block your IRS and tax questions! |
|
|
 |
If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
|
|
|
