Tax Topic

Household Employees

The Social Security and Medicare wage threshold for household employees is $2,400 for 2022 (up from $2,300 for 2021). This means that if you pay a household worker (nanny, housekeeper, landscaper, groundskeeper, etc., but see link below for definition) cash/check wages of $2,400 or more, that worker is considered your employee, and you will have to report and pay Social Security and Medicare taxes on that employee's 2022 wages. If you do not report the wages on time, you may have to pay a penalty in addition to the overdue taxes. To file the various tax returns, including employment tax returns, you need an Employer Identification Number (EIN).

As the employer, you pay your share of the Social Security and Medicare taxes, along with the taxes you withheld from the employee's wages, when you file your own tax return. The 2022 Social Security tax rate is unchanged at 6.2% for employers and 6.2% for employees on wages up to $147,000 (up from $142,800, in 2021, and increasing in 2023 to $160,200). The Medicare tax rate is unchanged at 1.45% of all wages for each of the employer and employee. You must also provide annual W-2 copies to your employee and the IRS by January 31. In Washington State, you also must have a business license and pay unemployment insurance (and possibly workman's comp.)

We can give you some direction so that you can do all of this yourself. The difficult part is understanding the differences between the Federal EIN, payroll taxes (employee portion and your portion), the State business license, and State employment agency payroll taxes; but once you get it straight, it's not too bad. On the other hand, we highly recommend as a company that specializes in helping folks stay compliant with the mid-year household employee requirements.

For more information, see Social security and Medicare wages in IRS Publication 926, Household Employer's Tax Guide:

Here is the IRS definition of household employee:

Here is an IRS link to information on how to apply for an Employer Identification Number (EIN).:

Here is a link to the Social Security Administration's take on household employees:

< Back to Tax Topics page