| A few years ago, there were a number of scandals involving federal nominees or officials who had failed to pay "nanny" taxes on their employees. Despite the fact that many household employees request "under the table" payments in cash and that many employers do not want to bothered with the paperwork or additional expense, employers who do not make the required withholdings and payments may be subject to interest and penalties assessed by the Internal Revenue Service.
Household employees are defined by the IRS as those individuals working in or around the private homes of their employees. They include but are not limited to housekeepers, maids, baby-sitters, and gardeners whose activities are controlled by their employers. To be considered an employer, an individual most control not only what the household employee does but also the manner in which he or she does it. Not everyone who works in a private residence is an employee. Homeowners are not liable for employment taxes on independent contractor such as repairmen and plumbers.
An employer is required to withhold Social Security and Medicare taxes from all wages of household employees above a certain amount established by the Internal Revenue Code. In addition, the employer must match the amounts withheld and forward payments along with the appropriate forms to the IRS. The good news is that the employer is not required to withhold federal income taxes from the wages of an employee unless the employee requests it.
Employers who are liable for Social Security and Medicare taxes on their household employees will also be liable for federal unemployment tax payments. The federal unemployment tax is solely the liability of the employer and is not withheld from the wages of an employee.
Not all employees are subject to employment taxes. The employer is not required to withhold from or make payments on behalf of a spouse, a child under 21, a parent, or an employee under 18 for whom the position is not a primary occupation.
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