Before applying for a small business loan, you need to prepare some paperwork. Here’s what you must do.
Household employee is an important tax term. Bankrate explains it.
What is a household employee?
A household employee is a person who performs non-business services for a taxpayer in or around a taxpayer’s home. This includes child care and other dependent care, housecleaning, cooking and yardwork. The taxpayer may be liable for employment taxes for the household employee.
Household employees are any workers who perform services in your house, unrelated to any other business activity that may occur within your home. Household employee responsibilities may include, but are not limited to:
- Baby sitter
- Domestic worker
- Health aide or home health nurse
- Landscape workers
Household employees are distinct from contractors you use to perform services on your house, like your contracted pest service. Someone qualifies as a household employee only if they follow your directives to perform their main job duties.
A household employee may be employed on a full- or part-time basis, and because of their status as an employee, you owe them certain responsibilities as an employer. This is particularly important when it comes to the matter of taxation.
If your household employee ears more than $2,000 in a given year, you must pay their Social Security and Medicare taxes, at the rate of 15.3 percent of their cash wages. This equals the 7.65 percent that you owe as an employer and your household employee’s 7.65 percent responsibility as an employee.
Additionally, if your household employee earns more than $1,000 in a year, you must pay their federal unemployment tax of 6 percent of cash wages, up to $7,000, and may be liable to pay state unemployment tax as well.
Household employee example
If you work from home and run your own business with employees, they are not household employees. Rather, they are employees of your company.
If you hire a nanny, however, to care for your kids during the workday so that you can focus on running your business, then your nanny is a household employee. Depending on her wages, you may owe Social Security, Medicare and unemployment taxes for the nanny’s income.
More From Bankrate
3 min read Feb 24, 2022
Bankrate’s guide to scoring the best deals on every item you’re looking for this Amazon Prime Day.4 min read Jun 16, 2021
Here’s a look at how taking paid time off can benefit your mental health and actually make you a better employee.5 min read May 27, 2021
New decade. New personal finance-savvy you.5 min read Dec 18, 2020
Out of work due to coronavirus? Here’s what you can do to help lessen the financial blow.11 min read Oct 28, 2020
Forecasts were wide-ranging when it comes to predicting how much damage the pandemic caused.8 min read Jun 03, 2020
That’s led the majority of economists to say risks are tilted toward the downside.8 min read Mar 04, 2020
Millennials plan to spend $208 for Feb. 14, compared with $152 for the average adult.7 min read Feb 10, 2020
The findings come at a time when job growth appears to be booming.7 min read Dec 19, 2019