Tax and Payroll Tips for Household Employers: Considerations
Hiring help at home—whether it’s a nanny, housekeeper, chef, or estate manager—means stepping into the role of a household employer. That title comes with important legal and financial responsibilities, particularly when it comes to payroll, taxes, and classification.
Here’s what you need to know in 2025 to stay compliant and set yourself and your employee up for success.
1. Household Workers Are Almost Always Employees—Not Independent Contractors
The IRS is very clear: if you control what work is done and how it’s done, the person is your employee—even if they work part-time or only a few hours a week.
Common household employees include:
- Nannies and newborn care specialists
- Housekeepers and laundresses
- Estate managers and personal assistants
- Private chefs
- Senior caregivers
Hiring them as a 1099 contractor can result in penalties, back taxes, and interest. If you’re unsure, it’s safest to classify them as a W-2 employee.
2. You Must Withhold and Pay Employment Taxes
If you pay a household employee $2,900 or more in 2025 (IRS threshold), you are responsible for:
- Social Security & Medicare taxes (FICA)
- Federal Unemployment Tax (FUTA)
- State Unemployment Insurance (SUI) and potentially Disability Insurance (depending on your state)
- State Disability Insurance (in certain states)
- End of Year Filing You’ll need to issue a W-2 at year-end and file Schedule H with your federal tax return.
Pro tip: California and New York have stricter wage and hour laws. Be sure you’re complying with state-specific regulations, including overtime, minimum wage, paid sick leave, and rest breaks. Checkout the IRS household employer tax guide here.
3. Pay Legally—It Benefits Everyone
Paying on the books offers critical protections:
- For you, it protects against audits, lawsuits, and fines.
- For your employee, it provides access to unemployment benefits, Social Security, Medicare, and a verifiable income history for loans or housing.
4. Use Household Payroll Services to Simplify Compliance
Managing household payroll manually is tedious and risky. Consider using a service that specializes in this niche, such as:
- HomePay by Care.com
- SurePayroll
- GTN (Global Tax Network)
- Poppins Payroll
These services handle onboarding, tax withholdings, year-end tax documents, direct deposit, and even help you navigate state-specific requirements.
5. Consider Offering Benefits to Attract & Retain Talent
In today’s competitive domestic staffing market, high-quality professionals expect more than just a paycheck. Consider offering:
- Health reimbursement arrangements (HRAs)
- Paid time off
- Professional development stipends
- 401(k) contributions through household employer programs
These can increase loyalty and reduce turnover—especially important for long-term roles like estate managers or full-time nannies.
6. Keep Good Records
Maintain a written work agreement, time logs, and copies of pay stubs and tax filings. This is crucial if there’s ever a dispute or audit.
7. 2025 Payroll & Tax Timeline Considerations for Household Employers
Before Hiring:
- Confirm the worker is correctly classified as an employee (not an independent contractor)
- Apply for an Employer Identification Number (EIN) at irs.gov
- Register with your state’s tax and labor departments, if required (e.g., California EDD or Texas Workforce Commission)
- Create a written work agreement that outlines duties, wages, schedule, and benefits
Each Pay Period:
- Track hours worked and calculate gross and net pay
- Withhold required taxes, including: Social Security and Medicare (FICA), Federal Unemployment Tax (FUTA), State Unemployment Insurance (SUI) and any other required state taxes
- Provide pay stubs to your employee
- Pay any due state and federal tax deposits
Quarterly:
- File any required federal tax forms (such as Form 941, if applicable)
- Submit state unemployment insurance taxes
- Review payroll records for accuracy
End of Year (November–January) Considerations:
- Confirm employee information (name, SSN, address, and total wages)
- Provide your employee with Form W-2 by January 31
- File W-2 and W-3 with the Social Security Administration by January 31
- File Schedule H with your personal tax return (Form 1040)
- Submit any required state annual wage reports or tax filings
Final Thoughts
Hiring in the home can make a huge difference in your family’s quality of life—but it comes with obligations. By paying legally, keeping accurate records, and using the right tools, you’ll protect yourself and provide valuable security to your employee.
Need help navigating your responsibilities? Town + Country Resources can connect you with trusted payroll providers and walk you through the setup process when you hire one of our candidates.