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 2006 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.

What are the FICA tax rates?

Maximum Wages Subject to Social Security tax	$94,200.00
Social Security tax rate (Employee)	6.20%
Maximum Social Security tax (Employee)	$5,840.00
Social Security tax rate (Employer) ¹	6.20%
Maximum Social Security tax (Employer) ¹	$5,840.00
Social Security tax rate (Self Employed) ²	12.40%
Maximum Social Security tax (Self Employed) ²	$11,680.00
Maximum Wages Subject to Medicare tax	Unlimited
Medicare tax rate (Employee)	1.45%
Medicare tax rate (Self Employed)	2.90%

¹ Employees and employers each pay one-half of the tax.
² 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.

What are the FUTA tax rates?

FUTA (Unemployment) Taxes
Maximum Wages Subject to FUTA tax	$7,000.00
FUTA tax rate (Employer) ¹	6.2%
Maximum FUTA tax (Employer) ¹	$434.00

¹Only the employer pays FUTA tax.

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

Tax Directory Topics:
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. Please read this IMPORTANT Editor's Note regarding navigating IRS publications with Adobe Acrobat Reader.
IRS publications can also be ordered by calling 1-800-829-3676.

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