If you employ a household worker who isn’t an independent contractor, you may be required to pay employment taxes on the worker’s cash wages. This is commonly referred to as the “nanny tax.”
In 2024, when a household employee’s cash wages reach at least $2,700, you must pay the employer share of Social Security (6.2%) and Medicare (1.45%) taxes and withhold the employee share of these taxes (also 6.2% and 1.45%, respectively). You aren’t required to withhold federal income tax, but you must pay federal unemployment tax on wages of $1,000 or more. This tax is assessed only on the first $7,000 of wages paid.
To pay these obligations, increase your quarterly estimated tax payments or increase withholding from your wages. Additional requirements will apply when you file your tax return for the year. Contact the office with questions.