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Payroll Taxes on Household Employees

If you are a working parent or, for that matter, anyone who sets out to hire a maid, babysitter, caregiver for an elderly relative, or some other kind of domestic help, it may come as a surprise to discover that you'll be required to pay significant amounts in employment taxes.



For various reasons, the person you hire may not want you to withhold taxes, preferring to be paid "under the table" in cash.

However, the tax laws provide penalties, sometimes substantial ones, for noncompliance. If you went for several years without paying Social Security and Medicare taxes, for example, the back taxes, interest, and penalties you'd owe could add up to hundreds or even thousands of dollars.

Employers who have paid their domestic workers in cash, without paying payroll taxes, have been surprised to find that, if a former employee files for unemployment benefits, the state will report them to the IRS, triggering an audit that goes back many years.

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