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You must first determine if you have an employee. You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
Do You Need To Pay Employment Taxes? If you paid cash wages of $1,700 or more in 2010 to any one household employee then you are required to withhold and pay social security and Medicare taxes.
The taxes are 15.3% of cash wages.
Your employee's share is 7.65%.
(You can choose to pay it yourself and not withhold it.)
Your share is a matching 7.65%.
If you paid total cash wages of $1,000 or more in any calendar quarter of 2009 or 2010 to household employees then you are required to pay federal unemployment tax.
The tax is usually 0.8% of cash wages.
Wages over $7,000 a year per employee are not taxed.
You also may owe state unemployment tax.
If your household employee cares for your dependent who is under age 13 or for your spouse or dependent who is not capable of self-care, you may be able to take an income tax credit of up to 35% of your expenses. To qualify, you must pay these expenses so you can work or look for work. If you can take the credit, you can include in your qualifying expenses your share of the federal and state employment taxes you pay, as well as the employee's wages. For information about the credit, see Publication 503, Child and Dependent Care Expenses.
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