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District of Columbia Fact Sheet Household Tax Compliance Tips


HOMEWORK SOLUTIONS IS HERE TO HELP!

Payroll tax compliance for your new employee does not need to be terrifying, time consuming or expensive. HomeWork Solutions is a nationally recognized “household payroll” service company, providing household employers nationwide with trusted and time saving payroll and payroll tax solutions.

WORKER CLASSIFICATION IS THE KEY

You become a household employer when you hire an individual to perform duties and provide services under your direction in your private home. Generally, these workers are your employees, not independent contractors. Failure to properly classify the worker and make the appropriate employment tax filings and payments is considered tax fraud by the IRS.

PAYROLL TAX RESPONSIBILITIES

You are responsible for federal employment taxes when you pay household workers as little as $1,000 in a calendar quarter or when you pay any individual employee age 18 or over $2,700 in a calendar year.

You have both Federal and State tax filing responsibilities. Federal employment taxes are reconciled with the household employer’s annual Federal Income tax return. Your state may require quarterly unemployment tax filings, as well as reports and remittance of state income taxes withheld, if applicable. Employee wages are reported to the Social Security Administration. Your employee is due a W-2 form in January.

Social Security and Medicare Taxes

The household employer is responsible for the payment of all Social Security and Medicare taxes to the IRS. You may choose to either collect your employee’s taxes via payroll deductions or fund these taxes yourself.

Unemployment Taxes

You will make contributions to the IRS and DC to fund unemployment and worker re-training programs.

Income Taxes

Federal and state income taxes are ultimately the responsibility of the household employee; however, best practice is to deduct these taxes from your full time employee’s wages to help them avoid owing large sums when they file their annual income tax returns.

OTHER LEGAL RESPONSIBILITIES

Verification of Work Eligibility

All U.S. employers are required to verify a candidate’s employment eligibility using Form I-9.

Use of the DHS E-Verify program is not mandatory. We can do this for you for a one-time $50 fee. You can also do it yourself for free at https://www.e-verify.gov/employers/enrolling-in-e-verify. It must be completed within 3 days of hire.

Fair Labor Standards Act (FLSA) Compliance

Maintain accurate and contemporaneous records including time tracking, gross pay calculations, and detailed records of all deductions from the employee paycheck.

Pay no less than minimum wage on an hourly rate basis.

Health Insurance

You are not required to provide employee health insurance, however there are financial and retention advantages to contributing some or all of your employee’s health insurance premium. HWS is happy to discuss this with you.

DISTRICT OF COLUMBIA LABOR LAWS

Minimum Wage

Minimum wage in Washington, D.C. is currently $17.50/hr.

DC extends FLSA minimum wage standards to all household employees, excluding companions. Pay may be no less than the greater of the state or federal minimum wage.  Employees under the age of 18 years old may be paid the minimum wage established by the US government, rather than the Washington, D.C. minimum wage.

If you schedule an employee to work at least 4 hours per day, then you must pay them for at least 4 hours of work, even if the employee is sent home early.

Overtime Pay

All live-out workers receive an overtime differential of 1.5 times the hourly wage for hours over 40 in a work week. Overtime compensation is not required for live-in employees.  Overtime or premium pay is not required for hours worked in excess of 8 per day or on weekends or holidays.

Paid Time Off

DC domestic workers entitled to overtime payments accrue 1 hour of sick and safe leave for every 87 hours worked, to a maximum of 24 hours/year. If you already provide a minimum of 3 paid sick days, you do not need to do the accrual.

If you do not specify in your employment policies or work agreement with your employee, you are required to pay accrued vacation leave upon separation from employment.

Paid Family Leave

Employers are required to allow employees to take paid family sick leave. The amount of paid leave depends on the specific situation of the employee:

Up to 8 weeks for an employee to bond with a new child.

Up to 6 weeks for an employee to care for a family member with a serious health condition.

Up to 2 weeks for an employee’s own serious health condition.

Paid family leave benefits are funded through a small tax paid by employers on a quarterly basis. In turn, the District of Columbia Department of Employment Services pays employees who require paid family leave benefits.

Unpaid Time Off

You are obligated to allow 24 hours of unpaid leave during a 12-month period for employees who are parents to attend or participate in a child’s school-related activities. The employee must give notice of the need for leave at least 10 days in advance, or as soon as otherwise possible.

In the District of Columbia, you must permit employees to take off from work, unpaid, on April 16, District of Columbia Emancipation Day, unless doing so would disrupt the operations and make production or service delivery particularly difficult. An employee must notify you of their desire to take time off on April 16 at least 10 days in advance of that date.

Mileage Reimbursement

The federal government establishes and updates a maximum rate for non-taxable mileage reimbursement each year.  The current rate is $0.67 per mile.

Payroll Frequency

DC allows you to pay your household worker daily, weekly, bi-weekly or semi-monthly, but does not permit monthly pay cycles. Pay upon separation is due on the next scheduled pay date or within 7 days, whichever is sooner.

Payroll Documentation

DC law requires all employees receive a written pay rate notice at time of hire and any time the hourly rate changes.

Each notice should include the rates of pay (this includes the overtime rate if applicable), payroll frequency, and regular payday for the employee. You also need to provide your name, address and telephone number.

You can find a sample pay rate notice here.

Employment Contract Requirements

DC does not require a written employment agreement. However, a free sample work agreement can be found here.

Workers’ Compensation Insurance

DC requires that all household employers obtain Workers’ Compensation Insurance for every employee that works 240 hours or more per quarter. HWS ALWAYS recommends obtaining a Workers Compensation Insurance policy for the protection it provides in the event of a work-related injury sustained by your employee. A policy can usually be obtained easily and cost effectively by contacting your Homeowner’s or Renter’s Insurance provider. HWS can help you obtain this insurance through our insurance partner (just give us a call).

State Unemployment Insurance

For Washington D.C., you pay 2.7% in taxes on the first $9,000 of wages paid to each employee. If you have previous employees, you may be subject to a different rate.

Frequency of Tax Filings

In the District of Columbia, you have the option to file wage information and pay contributions on a quarterly or annual basis. However, regardless if you file annually or quarterly, you are required to record monthly employment levels and wages paid to each employee during each quarter. HWS recommends filing quarterly.

HWS WILL HELP YOU DO THE RIGHT THING

HWS knows that most families want to pay their household employees legally and ensure that the employee receives workers compensation and unemployment insurance protections. You also want to establish a principled relationship with your employee who is caring for and interacting with precious family members. Getting the relationship started on the right footing, including complying with legal and tax formalities, helps set the tone for the relationship.