Do I owe Social Security taxes on my housekeeper?
You do — which comes to most people as a surprise.
You probably know that you owe a nanny tax on the wages of a regular babysitter. That same tax applies to any household employee. That includes someone you hire to clean your house, even if the cleaner comes just half a day every two weeks.
You might not think of half-day cleaning people as your employees. But they are, if you hire them directly, control the hours they work, tell them what to do, and supply the equipment they work with. The same is true for babysitters who work regular hours, nannies, caretakers, health aides and other people you hire for full-time or part-time work.
They would not be your employees if you hire them through an agency and the agency pays their wages. They are also not your employees if they have their own business, control their own hours and bring their own equipment, such as mops or lawn mowers. Otherwise, you're the boss.
It doesn’t matter that your cleaner works for other people on other days. The point is that he or she also works for you.
As the employer, you’re required to pay a Social Security tax, a Medicare tax and federal unemployment taxes, if you pay that person at least $1,800 a year. You owe half the Social Security and Medicare tax, and the worker pays the other half. Or, you can choose to pay both halves yourself. There might be state taxes, too.
You also should fill in Form I-9 to show it’s legal for that person to work in the United States.
It’s known that many families do not pay Social Security taxes for their regular babysitters, and might not even know that the law applies to a once-a-week cleaning person, too.
Or they do know, but the employee is happy just taking the check, and you don’t want to bother with the paperwork.
What are the consequences of not paying? For one thing, it’s tax fraud, which is never a good idea. And — if you were thinking about it — you can’t run for public office, because the tax lapse will come out.
Mostly, your employee might discover — several years from now — that he or she was entitled to Social Security or unemployment pay and didn’t get it. If that’s reported, you will be liable for the back taxes, plus interest and penalties.
All this aside, paying the taxes is the right thing, for any household worker. Someday, they’ll need Social Security and Medicare, just as you will.