Section One - Am I a Household Employer?
You're a household employer if you pay someone to perform household work and that worker is your employee. Household work is work done in or around your home by baby-sitters, nannies, health aides, private nurses, maids, caretakers, yard workers and similar domestic workers.
A household worker is your employee if you can control not only what work is done, but also how it is done. If the worker is your employee, it doesn't matter whether the work is full-time or part-time, or if you hired the worker through an agency or from a list provided by an agency. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
If only the worker can control how the work is done, the worker is not your employee but is considered self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business. If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.
If you want the Internal Revenue Service to Determine whether a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
You pay Mary Smith to baby-sit your two children and do housework three days a week in your home. Mary follows your specific instructions as to how to care for the children and what housework must be completed. You also provide the household items and supplies that Mary needs to do her work. Mary is your household employee.
You pay Ed Jones to landscape your yard. Ed also performs this service for other homeowners in your neighborhood. He provides his own tools and supplies, and he hires and pays any helpers he needs. Ed and his helpers are not your household employees.
When you hire a household employee to work for you on a regular basis, he or she must complete the employee part of the Department of Homeland Security Form I-9, Employment Eligibility Verification. You must verify that the employee is either a U.S. citizen or an alien who can legally work in the United States and then complete the employer part of the form. Keep the completed form for your records and reverify the employee's work authorization if and when necessary as indicated on the form. You must make the form available for review upon notice from an authorized U.S. Government official. Don't submit it to the IRS, INS, or to any other local, state, or federal government entity.
Do You Need to Pay Employment Taxes?
|If You:||Then You Need to:||For More Information Contact:|
A. Social Security/Medicare
Generally, don't count wages you pay to:
For exceptions see U.S. Publication 926, Household Employer's Tax Guide
Withhold and pay social security and Medicare taxes.
The taxes are 15.3% of cash wages.
Your employee's share is 7.65%.
Your share is a matching 7.65%.
Internal Revenue Service
Tax forms, instructions and publications:
Website address: www.irs.gov
B. Federal Unemployment Tax (FUTA)
Don't count wages you pay to:
Pay federal unemployment tax.
The tax is 0.6% of cash wages. (The FUTA tax is 6.0% of your employee's FUTA wages. However, you may be able to take a credit of up to 5.4% against the FUTA tax, resulting in a net tax rate of 0.6%.)
Wages over $7,000 a year per employee are not taxed.
You may also owe state unemployment tax.
|C. Federal Income Tax Withholding|
If both parties agree to federal income tax withholding. Note: federal income tax withholding is not required.
Withhold federal income tax.
Obtain Form W-4, Employee's Withholding Allowance Certificate, from employee.
Withhold federal income tax based on the filing status and exemptions as shown on Form W-4, using the income tax withholding tables found in U.S. Publication 15, Circular E, Employer's Tax Guide.
Employer may file annually on U.S. Schedule H, Form 1040.
D. Massachusetts Department of Unemployment Assistance (DUA)
Don't count wages you pay to:
Register with DUA.
File quarterly employment and wage details report.
Pay state unemployment tax.
DUA determines annual contribution rate.
Department of Unemployment Assistance (DUA)
|E. Massachusetts Department of Industrial Accidents (DIA)|
If household employee works at least 16 hours per week.
Carry workers' compensation insurance.
File Application for Workers' Compensation Insurance if you have been rejected by two companies licensed to write workers' compensation insurance in Massachusetts. You can obtain this form by calling the Workers' Compensation Rating and Inspection Bureau of Massachusetts at 617-439-9030.
Department of Industrial Accidents (DIA)
Website address: www.mass.gov/dia
|F. Massachusetts Department of Revenue (DOR)|
If both parties agree to state income tax withholding.
Note: State income tax withholding is not required.
Withhold state income tax.
Register with DOR to collect state income tax withholding through MassTaxConnect.
Withhold state income tax based on the exemptions as shown on Form W-4 or Form M-4, Massachusetts Employee's Withholding Exemption Certificate , using the income tax withholding tables found in Circular M, Massachusetts Income Tax Withholding Tables .
Frequency of employer filing depends on amounts withheld. If the withholding tax is more than $100, the employer must file more frequently than annually.
Department of Revenue (DOR)
Contact Center toll-free in Massachusetts:
Website address: www.mass.gov/dor
Section Two - Federal Responsibilities
At the federal level, there are generally three taxes that a household employer may be responsible for paying. They are Federal Insurance Contributions Act (FICA) taxes (Social Security and Medicare), the Federal Unemployment Tax (FUTA), and federal income tax. The Social Security tax pays for old age, survivors, and disability benefits. The Medicare tax pays for hospital insurance. FUTA taxes pay unemployment compensation to workers who lose their jobs.
What Federal Employment Taxes Must I Pay?
- Social Security and Medicare Taxes
If you pay cash wages of $2,000 or more in 2017 to any one household employee, then you need to withhold and pay Social Security and Medicare taxes. The taxes for you (employer) are 7.65% (6.2% for Social Security tax and 1.45% for Medicare tax); the taxes for your employee are 7.65% (6.2% for Social Security tax and 1.45% for Medicare tax). You're responsible for payment of your employee's share of the taxes as well as your own. You can withhold your employee's share or pay it from your own funds. The Social Security and Medicare taxes you pay from your own funds to cover your employee's share must be included in the employee's wages for income tax purposes. However, they are not counted as Social Security and Medicare wages or as Federal Unemployment wages.
Cash wages include wages you pay with checks, money orders, etc. Cash wages don't include the value of food, lodging, clothing, and other noncash items you give your household employee. However, cash you give your employee in place of these items is included in cash wages.
Don't count wages you pay to your spouse, your child under age 21, your parent, or any employee under age 18 during the calendar year.
See U.S. Publication 926, Household Employer's Tax Guide, for a further explanation of Social Security and Medicare taxes.
You hire a household employee to care for your child and agree to pay him or her cash wages of $100 per week. You expect to pay your employee $1,900 or more for the year. You should withhold your employee's share of $7.65 for Social Security/Medicare Tax from each $100 payment and pay your employee the remainder ($92.35). You will withhold $7.65 from your own funds when you pay the taxes to the Internal Revenue Service.
- Federal Unemployment Tax
If you pay total cash wages of $1,000 or more in any quarter in the current year or preceding calendar year for all household employees, then you need to pay Federal Unemployment Tax (FUTA). A calendar quarter is January through March, April through June, July through September, or October through December. The Federal Unemployment Tax is 6% of your employee's FUTA wages. However, you may be able to take a credit of up to 5.4% against the FUTA tax if you pay your state unemployment tax contributions on time, resulting in a net FUTA tax of 0.6%. The tax applies to the first $7,000 you pay each employee as wages during the year.
Don't withhold FUTA taxes from your employee's wages. You must pay the FUTA tax from your own funds. Don't count wages you pay to your spouse, your child under age 21, or your parent.
You hire a household employee and agree to pay wages of $200 every week. Because you're paying cash wages of $1,000 or more in a calendar quarter, the first $7,000 you pay the employee is FUTA wages subject to FUTA tax. During the year you pay your household employee cash wages of $10,400. You pay all the required contributions for the year to the state unemployment fund on time. Your FUTA tax for the year is $42 ($7,000 x 0.6%).
- Federal Income Tax Withholding
Federal income tax withholding is not required for a household employee, but may be paid if the employee requests it and you agree. If both parties agree to federal income tax withholding, the employee must give you a completed U.S. Form W-4, Employee's Withholding Allowance Certificate. The amount of income tax withholding must be based on marital status and withholding allowances, as indicated on Form W-4. You must also get from the household employee their Social Security number (SSN). If your employee doesn't have a Social Security number, he/she may get one by completing U.S. Form SS-5, Application for a Social Security Card. See U.S. Publication 15, Circular E, Employer's Tax Guide, for more information about federal income tax withholding and for the current federal income tax withholding tables. You can also obtain this guide by calling the IRS at 1-800-829-3676.
If your household employee doesn't request federal income tax withholding, he/she should be aware that he/she may have a requirement to make federal estimated tax payments. See U.S. Form 1040-ES, Estimated Tax for Individuals, for further information on making estimated payments.
How Do I Pay Federal Employment Taxes?
If you will be paying Social Security and Medicare taxes, FUTA and/or federal income tax withholding, you will first need to obtain an Employer Identification Number (EIN). You can do so by filing U.S. Form SS-4, Application for Employer Identification Number. All of the federal employment taxes for a household employee can usually be paid with an individual income tax return by filing and attaching U.S. Schedule H, Household Employment Tax, to your Form 1040.
You will also need to file U.S. Form W-2, Wage and Tax Statement, for each household employee to whom you pay wages subject to any employment taxes. You must complete Form W-2 and give copies B, C and 2 to your employee by January 31 of the following calendar year. You must send Copy A of Form W-2 with U.S. Form W-3, Transmittal of Wage and Tax Statements, to the Social Security Administration by February 28 of the following calendar year.
For more information regarding federal tax return requirements for household help, contact the Internal Revenue Service (IRS) at 1-800-829-1040. If you need additional forms, instructions or publications, call the IRS at 1-800-829-3676 or visit their website at www.irs.gov.
Federal information contained in this publication is from U.S. Publication 926, Household Employer's Tax Guide, and other Internal Revenue Service publications.
Section Three - State Responsibilities
At the state level, there are three taxes that a household employer may be responsible for paying. They are unemployment insurance, through the Department of Unemployment Assistance (DUA), workers' compensation insurance, through the Department of Industrial Accidents (DIA), and state income tax, through the Department of Revenue (DOR). Money collected by DUA goes directly into a trust fund from which benefits are paid to qualified claimants. Workers' compensation is a system of insurance that protects employees if they are injured on the job or contract a work-related illness.
What State Employment Taxes Must I Pay?
- Unemployment Insurance
If you pay cash wages totaling $1,000 or more in a calendar quarter to household employees, you are required to pay unemployment insurance to the Department of Unemployment Assistance. Exempt employment includes services performed by: a child under the age of 18 for his or her mother or father; an individual for his or her spouse; or an individual for his or her son or daughter. You can register with DUA via the UI Online. After registering with DUA, you will receive an 8-digit Employer Account Number (EAN) that must be used for conducting all business with DUA. You also will receive a notice with a UI Online User ID and password. You must activate your account before DUA can accept wage records and contribution payments.
If you need further information regarding unemployment insurance taxes for employers, contact DUA at 617-626-5075 or visit DUA's website at www.mass.gov/dua .
- Workers' Compensation Insurance
If a household employee works at least 16 hours per week, you are required to carry workers' compensation insurance. You can obtain insurance through any insurance agent or broker who handles business insurance or through a direct writer of insurance. If you have been rejected by two companies licensed to write workers' compensation insurance in Massachusetts, you may obtain workers' compensation coverage through the Massachusetts Assigned Risk Pool by filing an Application for Workers' Compensation Insurance. You can obtain this form by calling the Workers' Compensation Rating and Inspection Bureau of Massachusetts at 617-439-9030.
For more information regarding the workers' compensation system in Massachusetts, call the Department of Industrial Accidents at 617-727-4900 or 1-800-323-3249 or visit their website at www.mass.gov/dia.
- State Income Tax Withholding
State income tax withholding is not required for a household employee, but may be paid if the employee requests it and you agree. If both parties agree to state income tax withholding, you must register online through DOR's MassTaxConnect application, using your Federal EIN for registration purposes. The employee must give you a completed U.S. Form W-4, and if necessary, a completed Form M-4, Massachusetts Employee's Withholding Exemption Certificate. The amount of state income tax withholding must be based on withholding allowances, as indicated on U.S. Form W-4 or Form M-4, and on Circular M, Massachusetts Income Tax Withholding Tables.
If your household employee doesn't request state income tax withholding, he/she should be aware that he/she may have a requirement to make state estimated tax payments. See Form 1-ES, Estimated Tax Payment Vouchers for Individuals , for further information on making estimated payments.
A completed Form NHR , New Hire and Independent Contractor Reporting Form, for all new hires and reinstated employees should be faxed to DOR at 617-376-3262 or mailed to the following address, within 14 days of hire or reinstatement:
Massachusetts Department of Revenue
PO Box 55141
Boston, MA 02205-5141
New hire reports can filed online through DOR's Online New Hire Reporting System.
For more information on reporting new hires, call DOR's Child Support Enforcement Customer Service Employer Support Unit at 1-800-332-2733.
For most household employees, withholding will be between $101 and $1,200 annually; therefore, you would file and pay over state withholding (5.1% of wages) on a quarterly basis through MassTaxConnect or on Form M-941, Employer's Quarterly Return of Income Taxes Withheld. Employers withholding $5,000 or more are required to file returns and make payments electronically.
Note: Employers, including employers who don't have Unemployment Tax obligations, must file their Quarterly Wage Reports via DUA's UI Online system. Visit www.mass.gov/uima for more information.
For more information about withholding state income tax, call DOR's Contact Center Bureau at 617-887-MDOR or toll-free in Massachusetts at 800-392-6089.