How to Withhold Taxes for Domestic Help
If you hire a domestic worker to clean your house, mow your lawn or care for your children on a regular basis, you are technically required by law to withhold taxes from your domestic employee's wages unless you mutually agree that the person will work for you as an independent contractor. The issue of withholding taxes for domestic help came to public attention in 1993 when Zoe Baird, Bill Clinton's nominee for attorney general, withdrew her nomination when opponents discovered that she had failed to withhold taxes from wages she had paid to her nanny. Even if you are not considering public office, you can avoid a "nannygate" scandal of your own by conscientiously withholding taxes from the wages you pay to domestic workers.
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Things You'll Need
- Form W-4
- Federal tax tables
- Federal tax deposit coupons
- IRS Form 941
- Form W-2
Instructions
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Register with the Internal Revenue Service for an employer identification number (EIN) if you will be paying any of your domestic workers a sufficient sum to be liable for payroll taxes. As of 2009, if you will be paying a worker at least $1,700 during the current calendar year, you are required to withhold payroll taxes in the same manner as any other employer. Ask your domestic employees to fill out W-4 forms specifying the amount they want you to withhold from their wages.
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Calculate your domestic employee's wages at the end of each tax period. Calculate Social Security withholding by multiplying the employee's gross wages by 0.062 and calculate their Medicare taxes by multiplying their gross wages by 0.0145. Find the column in your IRS tax tables that corresponds to the pay period and the number of deductions that your employee specified on their W-4 form in order to find their income tax withholding. Subtract each of these amounts from their gross wages.
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Deposit the amounts you have withheld in the bank according to your IRS depositing schedule, along with matching employer's contributions for Social Security and Medicare. Use the federal tax deposit coupons that the IRS provides when you make your payroll tax deposit.
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Fill out the quarterly tax forms that you receive from the IRS and mail them in on time. If the amount you owe does not match the amount you have deposited, either include a check for the balance due or indicate whether you would like a refund or a credit toward future taxes for the amount you have overpaid.
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Fill out W-2 forms for each of your domestic employees by January 31 of the year following the calendar year when you employed them. Provide them with copies, keep a copy for your records, and mail the master copy to the IRS by February 28.
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