Domestic Employees and Nanny Taxes
Updated October 18, 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 AgingCare.com 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
- 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.
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.
- We handle payroll in any State.
- Caring, attentive, expert support.
- Prompt, professional responses, every time.
- We automate the process.
- If you don’t have many changes, you’ll never even have to think about payroll.
- Dedicated, competent payroll specialists.
- Responding to your needs quickly.
- We cater to you.
- No contracts.
- Low monthly fee.
SB 988: Increased protection for Independent Contractors
SB988 is called the “Freelance Worker Protection Act.” It creates protections for independent contractors in the private sector who are paid at least $250 for their services.
The bill requires that workers must be paid on or before the date in their contract or, in the absence of a contractual date, no later than 30 days after completion of services. It also prohibits conditioning payment on accepting less compensation or making certain changes to the contract.
It also requires a written contract between the hiring party and the worker, which the hiring party must retain for 4 years. The hiring party is prohibited from taking adverse action against a worker for exercising their rights under this bill and either the worker or a public prosecutor may bring a civil action as enforcement. [Source: Reed Smith]
