The rules and regulations surrounding domestic or household employment are constantly evolving. Here is a quick glance of 2015 household employment regulations.
$1900
The wage base that triggers an employer’s responsibility for household employment taxes – the so-called “nanny tax” – continues to be $1900 of wages paid in a year. This applies to all full time, part time, temporary or seasonal household employment. If an employer will pay wages to an individual household employee that will meet or exceed this threshold, to obligation to pay Social Security and Medicare taxes and to issue the household worker a form W-2 at year end exists. There are NO exempt wages, taxes are due on every dollar paid. The household employer is legally entitled to withhold (deduct) 7.65% from the household workers wages for Social Security and Medicare taxes. The nanny or other household employee is responsible for all income taxes due, even if they were not deducted from his or her paycheck.
Domestic Worker Bills of Rights
Domestic Work Bills of Rights (DWBR) legislation is in force in New York, Hawaii, California and Montgomery County, MD. DWBR legislation will become effective in Massachusetts in April 2015.
Mileage Reimbursement Allowed
Most nanny employers refer to the annual published IRS allowed mileage reimbursement rate to pay the nanny for the business use of her personal automobile. For 2015, this is 57.5 cents per mile. Reimbursement above this level is taxable income to the employee.
Minimum Wage
Nannies and other domestic service workers are covered by Federal minimum wage and overtime rules. The minimum wage increased January 1 in 13 states, and several states have scheduled increases later in 2015. A nanny may legally be paid no less than the greater of the applicable state or Federal minimum wage, must be paid for all hours worked, and may be eligible for an overtime differential of 1.5 times the regular hourly wage for hours worked over 40 in a 7 day work week.
Employer Notice of Pay Rates
California, New York and the District of Columbia require all employers to provide a written notification of hourly and overtime pay rates to all newly hired workers, including nannies, legislated by Wage Theft Prevention Act (WTPA) legislation. New York amended their WTPA to significantly increase the penalties due to the nanny for employer non-compliance to $50 per day, up to a maximum of $5000 per occurrence and eliminated the annual notification requirement. HWS provides free, PDF fillable WTPA notices to families. Agencies who would like a copy are encouraged to give them a call.
Questions?
The INA has several members who specialize in household payroll and tax preparation activities. Most will provide free telephone consultations. You can find INA member household payroll companies in the INA Member Directory, choosing Industry Service Providers > Payroll and Tax.
A special thank you to INA member HomeWork Solutions for providing this 2015 tax roundup.
HomeWork Solutions offers both household payroll and household payroll tax compliance services to US families on a nationwide basis and has partnered with INA nanny agencies since 1993.
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