Caregiver ~ Employee or Independent Contractor?

Have you paid your household professional tax? Many of us are familiar with the term “nanny tax.” The household professional tax not only includes the nannies, but also includes, babysitters (18 year olds+), caretakers, private nurses, cooks, gardeners, butlers, and other similar domestic workers.  For the senior population that could mean the caregiver or home helper you hire for yourself or a love one, you may have to pay taxes. Of course, if you hire from an agency and pay the agency then you may not have to file/pay the tax directly.  Or, if the person has their own business with other customers, then you may not have to pay taxes.

The household professional tax exists because the IRS considers an ongoing household helper to be the taxpayer’s household employee, rather than an independent contractor. As such, the taxpayer becomes an employer and must pay Social Security, Medicare, federal and state unemployment taxes, and other state taxes on the wages paid to that employee.

For tax year 2019, household professional taxes come into play when you pays any household employee $2,100 or more in a calendar year (or $1,000 or more in a calendar quarter for unemployment insurance taxes). For 2020 it’s $2,200.

IRS deadlines ~ if you have you household employee, a W-2 must be provided to each employee on or before January 31^st.  Then when you prepare your own personal taxes, you will need to file Schedule H.

State deadlines varies, however, in Washington State, fourth quarter reports and annual reports are usually due by January 31st.