Is a regular cleaning lady subject to the nanny taxes? Is the cleaning lady or housekeeper a household employee?
Any individual whom you employ to provide services in your home whom you pay directly AND whose total payments in the calendar year meets the IRS household employment threshold, $2,700 currently (2024), must receive a W-2 from the employer (family) and the household employer must pay the payroll taxes. So if your cleaning lady or housekeeper meets the description above, she might be your household employee. According to the U.S. Department of Labor employee and independent contractor advice, “most workers [who are classified as independent contractors] are employees under the FLSA’s broad definitions.”
- Social Security & Medicare Taxes
- State Unemployment Taxes where required
- Federal Unemployment Tax (FUTA) where required
The household employer is solely responsible for the remittance of the Social Security and Medicare taxes. Should the household employer fail to collect this tax from the employee via periodic payroll deductions, the employer remains responsible to remit or pay the tax to the IRS. The household employee CANNOT remit their share of Social Security and Medicare tax independent of the employer.
Many families try to classify their weekly (bi-weekly, monthly) cleaning ladies as independent contractors. In the vast majority of circumstances, this is a total legal fiction. The IRS and the Department of Labor will generally consider this misclassification of an employee as an independent contractor and can collect both back taxes and a penalty equal to the tax due (liquidated damages). According to the government, services performed by an individual for remuneration are considered to be employment … unless it is shown to the satisfaction of the government that the individual is free from the essential direction and control of the employing unit. The independent contractor rubric usually only works if the worker is properly incorporated, bonded and licensed in the trade and maintains “corporate formalities.”
Note: The IRS payroll tax threshold for 2024 is $2,700 paid in a calendar year.
If you wish to avoid this obligation, we recommend that you engage a cleaning service. You will lose both the control over who is sent to your home and lose your household employee tax obligations. Examples of such firms are Merry Maids, the Maid Brigade, Jiffy Maids, Molly Maids * – you can locate by Googling “home cleaning service YourTown YourState.” When you hire a service, you make your payments to Cleaning Services Inc. or Cleaning Services LLC – and not to Mary Jones.
* Provided for illustration only – HomeWork Solutions does not specifically endorse or recommend any particular home cleaning service.
>> Free Tool: Employee v. Independent Contractor Decision Wizard
>> IRS and US Department of Labor Misclassification Crackdown
Read the latest ruling from the Department of Labor on our blog.
