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Domestic Employees: Should You Pay Under The Table?

Domestic Employees: Should You Pay Under The Table?

It is a common complaint this time of year: taxes are complicated and expensive. Between your mortgage, your earnings, your itemized deductions and your domestic employees, filing taxes can be a long and arduous process. Wait, what do domestic employees have to do with taxes? According to the Internal Revenue Service (IRS) Publication 926, you should withhold taxes from pay made to domestic employees. How do you know who to pay and how much? What Are Domestic Employees? The IRS says that if you pay someone to do work around your home, and you control not only what they do but also how they do it, that is considered a domestic employee. These include: Nannies Cleaning People Caregivers Drivers Yard workers Maids Other types of employees may qualify as domestic employees. Check with the IRS to determine if a worker in your home is a domestic employee. Service providers who control their own tools, hours and services may or may not be considered domestic employees. These include plumbers and lawn services, or any other service that hires and pays their own employees. Some service providers could be considered employees for tax and workers compensation purposes. To find out how to determine who is or is not an employee, click here. What Should Be Withheld? For tax year 2017, any domestic employee paid more than $2,000 in the tax year must have Social Security and Medicare deductions withheld. In addition, their employer must also pay Social Security and Medicare on their behalf. Federal taxes do not need to be withheld unless the employer and employee agree to this in advance....