When Do I Become a Household Employer?
If you control your household employees’ schedules, what they do, how they do it, and their wages, the IRS regards them as your (W-2) employees. This includes home health aides, personal assistants, nannies, housekeepers, maids, chefs, gardeners, and various others working in or around your home.
By contrast, if you hire caregivers through a home care agency, you may pay a lot more, but they are treated as the agency’s employees, not yours.
Can I Treat My Household Staff as Independent Contractors?
The IRS frowns on regarding people working in your home as 1099 independent contractors.
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 serviced, then he is an independent contractor. The control of “how the work is done” is one of the central premises in these considerations.
Can’t I Just Pay Them in Cash and Ignore Everything Else?
Many families skip household employment taxes, more so in the past that in recent times. The IRS is most serious about “under the table” or cash arrangements however, treating them simply as tax evasion, which is a felony.
Household employment taxes are part of your personal Federal Income Tax return, which you sign under penalties of perjury. Besides, you’d be easily caught when one of the employees you did not register makes a claim for “Unemployment Benefits”.
Finally, even if you were routinely audited by the IRS years later and this came up, you’d be facing difficulties, for there is no statute of limitations on the failure to report and pay federal payroll taxes.
What About Short-Term Occasional Employment?
In 2017, $2,000 a year was the annual dollar amount paid someone working in or around your home that makes them your W-2 employee. Take for example that gardener who maintains your yard working some 10 or 15 hours a month, or the babysitter or senior caregiver you hire on occasion, if the amount you pay any of them aggregates to $2,000 or more per calendar year, the IRS wants you to treat them as your (W-2) household employees.
What Benefits Do I Derive as a Household Employer?
You’re about to employ an in-home caregiver, and you’re wondering if complying with California’s Nanny Tax Law has any benefits for you? The answer is “yes”, in more ways than one:
• It feels good to be in compliance: You don’t need the aggravations and possible felony charges that may accrue when you don’t comply with the IRS’s regulations. Instead, being in compliance brings peace of mind and the ability to carry on in life without complications.
• 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 household employment?
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 later)
How Does Kindly Care Improve Household Employment?
Kindly Care manages these three essential features on your behalf:
• Sourcing: Kindly Care attracts and interviews the best professional caregivers who are looking for long-term careers as home health aides
• Safety: By the time Kindly Care refers a caregiver to you, you would be assured that she has been thoroughly vetted, including Federal, state and local background checks, and driver’s license check.
• Compliance: You would benefit from Kindly Care’s status as experts at being in compliance of the various nanny tax laws and other laws governing California’s household employers
Is Kindly Care classified as a Home Care Organization (HCO) in California?
Since Kindly Care is not the employer of the caregivers, we are not classified as a Home Care Organization in California. However, we do ensure that we and our clients meet all labor and tax law requirements, and our caregivers are classified as W-2 employees of their clients.