Domestic Employees and Nanny Taxes

Updated January 20, 2024

It’s a topic we get asked about a lot, and yes, if you guide them on the work that you want done and HOW you want it done, then you do need to pay domestic workers as employees.

It will bring you peace of mind that you’re in compliance, avoiding penalties – and you’ll attract top-level candidates for the job.

If you have to file to become an Employer, it’s easier than you think. We’re here to help answer any questions along the way.

What is a domestic employee?

Household employees and domestic workers can include:

  • Nannies and Babysitters
  • Cleaners
  • Housekeepers
  • Caretakers
  • Gardeners and Landscapers

When you hire Domestic Services staff to help manage your home or care for a dependent, this means you must comply with State and Federal employment rules.

When you pay wages to any of these household support workers, and that amount exceeds a certain amount in a calendar year, you will need to provide your staff with proper pay stubs, as well as withhold the required tax withholdings.

The year-to-year amount can change based on IRS guidelines. In 2022 that amount was $2,400 (or more than $1000 in any quarter). In 2023 the amount is $2,600.00 (or more than $1000 in any quarter).

To learn more about overtime and caregivers, please check out the resources provided by here.

Who is NOT a household employee?

Plumbers, contractors, electricians, and the like who provide their services as independent contractors are not considered employees, no matter how often you use them.

If you’re wondering about an in-home tutor or teacher and California’s AB5, we encourage you to visit this National Law Review article. Stay tuned to this page if California makes any changes for classifying tutors and teachers during the Coronavirus Pandemic.

Employee vs. Independent Contractor

The U.S. Department of Labor released the updated guidelines to help California business owners determine how to make this distinction.

The U.S. Department of Labor today announced a final rule to help employers and workers better understand when a worker qualifies as an employee and when they may be considered an independent contractor under the Fair Labor Standards Act.

The rule provides guidance on proper classification and seeks to combat employee misclassification, a serious problem that impacts workers’ rights to minimum wage and overtime pay, facilitates wage theft, allows some employers to undercut their law-abiding competition and hurts the economy at-large.

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” explained Acting Secretary of Labor Julie Su. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”

If you still have questions, click HERE to find out if your worker is an employee or an independent contractor. We’re always happy to help, whether you’re a client or not.

How We Can Help

nanny taxes
  • Pacific Payroll Group can be your household employee payroll service for a low monthly fee.

    Including all the admin tasks involved – payroll tax deductions, tax reports & filings, W2s, direct deposit, online access, and more.
  • You don’t have to process your own payroll or calculate tax deductions, worry about when certain taxes are due, or have to prepare and file quarterly reports to the IRS and State (which have certain filing requirements that have to be met).
  • Pacific Payroll Group handles all of that for you, we remove the complexity.
  • It’s way easier and more affordable than you might think. Simply request a free quote based on your own, unique situation.

Why Choose Pacific Payroll Group?

Whether it’s a big company with lots of employees, a husband and wife, or a self-employed individual, we’re always happy to help.

Gordon and his firm are outstanding. I decided to work with Pacific Payroll Group because of the 5-star ratings he received previously. This was a great decision. I wanted to legally employ a part-time caregiver to work with my ailing wife in our home.

When I looked at all the different payroll agencies and reports involved in doing so, I was simply overwhelmed by it. That said I sat down with Gordon & he assured me that he would take care of all the different taxing entities and quarterly reporting requirements etc.

He did exactly as promised. He turned what would have been a nightmare for me to do myself into smooth running payroll for my home caregiver for an extremely reasonable monthly fee.

He is highly professional, and the few times I needed to contact him with a question, he got back to me promptly. You will certainly not be disappointed by using Pacific Payroll.“
Al P. via Yelp

We have dedicated payroll specialists in-office to work with you to customize solutions for your particular setup.

Alternatively, if you have changes or questions, we’re just a quick call or email away.

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What our clients say about us

Gordon and his team run this first class operation. Why go with the big box ADP when you can have professional, personalized services at a lower cost? It’s a no brainer.

They take care of my payroll needs for multiple locations so I can focus on growing my business. Gordon promptly responds to all my questions and concerns. He also helps me take care of additional issues like workers’ comp audits and taxes.

Julie L. via Yelp

I wish I would have known about them years ago. You call you get to talk to Gordon, you email your data into him and it gets done… like a smooth-running machine. I strongly suggest you call Gordon and start having him handle your payroll needs today.

We as business owners have enough to do without having to deal with Federal and State agencies. Put your efforts into your business that you know best, that is what makes you money.

Sharon D. via Google

We’ve been with this company for almost a year and could not be more pleased. Gordon keeps us in compliance with all of the complex employment and tax rules. He is extremely patient, committed and giving of his time and knowledge without reservation. If we need help understanding something he is always there for us.

If you’re thinking about getting someone to take over your payroll, give Gordon a call. He is more than affordable and worth every penny.

Kathleen M. via Yelp

I had stayed with a large payroll company because I thought it was difficult to change. Once my friend recommended Gordon, it was so fast and easy to switch! And my fees were cut in HALF!

And I pay nothing when they file quarterlies. And he’s a million times more responsive.

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