What Are My First Responsibilities as a Household Employer?
You first need to get an EIN number and register yourself in the state of California as a household employer (See above: “How Do I Pay My Caregiver?)
You then have to give wage notice in writing. California’s Wage Theft Prevention Act requires all household employees be given a notice in writing at the time of hiring, with copies kept in the employer’s as well as the employee’s files, highlighting the following:
• The employer’s name, residential address, and phone number, as well as the same information for their worker’s compensation insurance provider
• A definition of the regular pay day, and their hourly and overtime pay rates
• A definition of the schedule of hours you expect your new employee to work (although this needs to be defined at the start, it is flexible and you can deviate from that schedule per employer/employee ongoing arrangements).
What Are My Ongoing Responsibilities as a Household Employer?
Your ongoing responsibilities as a household employer require you to remain in compliance of California’s and the federal regulations governing taxes and labor laws. A critical part of Kindly Care’s mission is to facilitate precisely those tasks that keep you in compliance.
Why Can’t I Consider My Household Employee as an Independent Contractor?
If you control your employees’ schedule, what they do, how they do it, and their wages, the IRS regards them as W-2 employees. By contrast, if for example a lawn contractor offers his services to the public at large, brings his own tools, and controls how your lawn is managed, then he would be an independent contractor. The control of “how the work is done” is one of the central premises in these considerations.
Why Can’t I Place My Household Employee on my Company Payroll?
The IRS also considers it illegal to place a household employee on your company’s payroll. The legal considerations for that are:
• You ought not “expense” your household employee for they simply do not contribute to your company’s success
• The filing requirements for household employees differ from those of company employees
• Other issues come into play as well, such as your company’s group health insurer not paying for the health-related expenses of a household employee
There are exceptions to the above: if, for example, you are a “sole proprietor”, or if the home is on a for-profit farm, then you can add the costs of your household employee to your other deductible expenses.
What Are the Benefits of My Becoming a Household Employer?
People who become household employers for the first time have told us that “it feels good” to be in compliance of California’s nanny tax laws while helping an employee advance their career. Other benefits include:
Your employees’ loyalties: Paying your employer taxes attracts the best professional employees and provides them with all the protections and benefits that other professionals enjoy, such as building up their Social Security accounts, Medicare, disability, unemployment, worker’s compensation, and more. It also enables them to build a credit history so they can qualify for future financial commitments. Complying with nanny taxes thus builds up loyalty among your household employees.
Savings, training, and control: If you’d hired your caregiver through a home care agency, you’d pay considerably more for her services. In addition, you get to interview and train your employee and control how she goes about conducting the tasks you assign to her.
What Are the Disadvantages of My Becoming a Household Employer?
Having household employees means more work for you:
• You have to cater to their employee rights
• Worry about staying in compliance of the various nanny tax laws
And withhold and pay state and Federal taxes, unemployment insurance, social security and Medicare, and other taxes on a periodic basis (more on taxes separately)