Domestic Service in Private Homes-What You Need to Know

March 17th, 2020 at 10:12 AM

You might not be aware that the “Nanny Tax” is not just limited to nannies.

The IRS is stepping up its audits on those with workers in their private homes and its not just because of “nannies”.

Here are some of the rules:


You should withhold from the start of the job if you expect to meet the annual threshold of $2000 in cash wages. Both the employer and a nanny have the obligation to pay FICA taxes. As an employer, you are responsible for withholding your nanny’s share of the FICA. In addition, you must pay a matching amount for your share of the taxes. The FICA is divided between the social security and Medicare. The social security is 6.2% for the employer and 6.2% for the nanny, for a total rate of 12.4%. The Medicare is 1.45% each for both the employer and the nanny, total rate is 2.9%.
Unfortunately, there are additional rules associated with domestic service in your private home such as how to increase your withholding from your wages or filing and paying quarterly estimated tax payments, how to report if your a sole proprietor, and proper record keeping to name a few.

This is a complicated area of the tax law the needs the proper attention if you have domestic services being provided in your home. 

Are you overpaying your taxes?
Let's Talk