Household Employer Payroll Checklist

Before the First Paycheck

Several items need to exist before you pay anyone. Some involve state agencies that take weeks to process, so start these as soon as you have made the hire.

• Confirm the worker is an employee rather than an independent contractor, which for in-home care is nearly always the case
• Verify work eligibility and complete Form I-9 within the required window
• Apply for an employer identification number using Form SS-4; you cannot issue a W-2 without one
• Register with your state for unemployment insurance, and for income tax withholding if your state has it
• Agree in writing on the hourly rate, the schedule, the overtime rate, and the pay frequency
• Ask whether the employee wants federal income tax withheld; if so, collect a Form W-4
• Check whether your state requires workers compensation coverage for household employees

Every Pay Period

The recurring work is short once the setup is done. The goal is that the amounts you calculate, the money you set aside, and the figures you eventually report all agree.

• Record hours worked, separating regular hours from overtime hours
• Calculate gross pay from hours and rate
• Withhold Social Security at 6.2% and Medicare at 1.45%
• Withhold federal and state income tax only if you agreed to
• Produce a pay stub itemizing each amount with year-to-date totals carried forward
• Set aside both the withheld amounts and your matching employer share
• Pay the employee and keep the record

Through the Year

Unlike a business, you do not file quarterly federal payroll returns for household employees. The federal side is settled annually on Schedule H. State obligations usually are not annual, which is the part families most often miss.

• File and pay state unemployment insurance on your state schedule, commonly quarterly
• File state income tax withholding returns if your state requires them
• Increase your own paycheck withholding or make quarterly estimated payments to cover the Schedule H liability
• Watch the $1,000 quarterly threshold for federal unemployment tax if hours vary
• Keep the wage records current rather than reconstructing them in April

Year End

January is the busiest month. The deadlines are firm and the penalties for missing them apply even when the tax has been paid in full.

• Issue Form W-2 to the employee by January 31
• File Form W-3 with the Social Security Administration along with the W-2 copy
• Complete Schedule H and file it with your Form 1040
• Pay any remaining household employment tax with your return
• File your state annual reconciliation if required
• Give the employee the information they need for the Child and Dependent Care Credit if applicable

Wage and Hour Rules Are Separate

Tax compliance and wage law are two different systems, and satisfying one does not satisfy the other. Household employees are generally covered by federal minimum wage, and live-out workers are generally entitled to overtime after 40 hours in a week. Rules for live-in workers, and for companionship services, are more nuanced and several states impose stricter standards than federal law.

• Check both the federal Department of Labor rules and your state labor department
• A number of states have domestic worker protections covering rest breaks, notice, and paid leave
• Some states and cities set a higher minimum wage than the federal floor
• Overtime is calculated on hours worked, which is one reason to record hours on every stub

When to Use a Service

One employee paid on a regular schedule is manageable by hand if you are organized. The calculus shifts if you have multiple employees, variable hours, or a state with active enforcement. Household payroll services exist for exactly this, and the alternative to using one is doing the work consistently rather than doing it occasionally.