If you decide to hire someone to come to your house to look after the kids, provide professional nursing care for your ailing mother who lives with you or keep the lawn in shape so the homeowners’ association will get off your back, you’ll have some extra tax tasks to complete.
Below is a checklist of tax and labor laws that the Internal Revenue Service and tax professionals suggest you follow:
|When you hire a household employee:||Make sure the person can legally work in the United States. File Immigration and Naturalization Service, or INS, Form I-9, Employment Eligibility Verification.|
|Get your employee’s Social Security or tax identification number.|
|Find out if you need to pay state taxes, such as unemployment or workers’ compensation. Check with your state taxation office for rules. State unemployment tax contacts can be found in IRS Publication 926.|
|When you pay your household employee:||Withhold Social Security and Medicare taxes if total salary is $1,700 or more for 2009 (the same pay amount also applies in 2010).|
|Withhold federal income tax if your employee requests it and gives you a completed Form W-4.|
|Make advance payments of the earned income credit if your employee is eligible and provides you with a Form W-5.|
|Determine if you need to adjust your W-4 to increase your withholding or pay estimated taxes to cover your employment tax obligations.|
|Set up a household employee recordkeeping system.|
|By Jan. 31:||Get an employer identification number by filing Form SS-4.|
|Give your employee Copies B, C and 2 of Form W-2, Wage and Tax Statement.|
|By Feb. 28:||Send Copy A of Form W-2 to the Social Security Administration.|
|By April 15:||File Schedule H, Household Employment Taxes, with your Form 1040 federal income tax return. Details on filing this form are in Bankrate’s tax tip on household employers.|
When any of the filing deadlines listed above fall on a weekend or federal holiday, the deadline is the next business day.