TaxWise Strategy #3:

Hiring household help (ex: nanny, housekeeper or caregiver) ? You may owe payroll taxes and need to issue a W-2. Learn the rules to avoid costly penalties for misclassifying domestic workers:

If you control what work is done and how it's done, the worker is likely a household employee — not an independent contractor. Common examples include:

Nannies

Housekeepers

Gardeners

Elder caregivers (if you direct their work)

Simply paying someone cash or using a service like Venmo doesn't make them a contractor in the eyes of the IRS.

Your Tax Responsibilities

If you pay a household employee $2,700 or more in 2024 (adjusts annually), you must:

Withhold and pay Social Security and Medicare taxes (FICA)

You're responsible for your share and may withhold the employee's share.

Pay Federal Unemployment Tax (FUTA)

If you pay $1,000 or more in a calendar quarter.

File a W-2 by January 31

Report wages and taxes withheld to the IRS and the employee.

Send a Schedule H with your tax return

To report household employment taxes.

Penalties for Misclassification

Misclassifying an employee as an independent contractor (e.g., giving them a 1099) can lead to:

Back taxes

Penalties and interest

Possible legal liabilityHiring household help (ex: nanny, housekeeper or caregiver) ? You may owe payroll taxes and need to issue a W-2. Learn the rules to avoid costly penalties for misclassifying domestic workers:

If you control what work is done and how it's done, the worker is likely a household employee — not an independent contractor. Common examples include:

Nannies

Housekeepers

Gardeners

Elder caregivers (if you direct their work)

Simply paying someone cash or using a service like Venmo doesn't make them a contractor in the eyes of the IRS.

Your Tax Responsibilities

If you pay a household employee $2,700 or more in 2024 (adjusts annually), you must:

Withhold and pay Social Security and Medicare taxes (FICA)

You're responsible for your share and may withhold the employee's share.

Pay Federal Unemployment Tax (FUTA)

If you pay $1,000 or more in a calendar quarter.

File a W-2 by January 31

Report wages and taxes withheld to the IRS and the employee.

Send a Schedule H with your tax return

To report household employment taxes.

Penalties for Misclassification

Misclassifying an employee as an independent contractor (e.g., giving them a 1099) can lead to:

Back taxes

Penalties and interest

Possible legal liability