Paper Trails

Household employer payroll

In today’s busy world, millions of Americans rely on domestic workers to help manage their households.  Whether you’ve recently hired a nanny, a gardener, or any other type of domestic worker, understanding your responsibilities as a household employer is crucial.  Navigating payroll can be complex, involving tax regulations and employment laws. This article aims to simplify the process for you, offering straightforward steps to setting up payroll as a household employer. By the time you finish reading, you’ll know if you are considered a household employer and the key steps needed to ensure you’re compliant with legal requirements.

Who is considered a household employer?

You’re classified as a household employer if you’ve hired someone to perform work in your home and you control not only what work is done but how it is done. This could include a wide range of workers including those on the list below. The key aspect is control over the job details, which differentiates employees from independent contractors who typically manage their own work methods.

Household employers come in many forms, here are some examples:

  1. Families with nannies or babysitters: Employers who hire individuals to provide childcare services in their home.
  2. Homeowners with gardeners or landscapers: Those who hire professionals to maintain their gardens or landscape their property.
  3. Individuals employing housekeepers or maids: People who hire cleaning staff to manage the upkeep of their homes.
  4. Households with personal chefs: Families or individuals who hire chefs to prepare daily meals.
  5. Elderly or disabled individuals with caregivers: Those who require assistance with daily living activities and hire caregivers.
  6. Homeowners with handymen or private contractors for regular maintenance: Those who regularly employ handymen or contractors for ongoing home maintenance and repairs, and who control the work schedule and duties, potentially classifying them as household employees.

In each of these examples, the key factor that often determines the employer-employee relationship is the level of control the employer has over what work is done and how it is performed.

What are the steps to start payroll as a household employer?

Once you have determined if you are classified as a household employer, you need to begin the process of setting up payroll services.  Below are the steps to take in this process.

Obtain an EIN

The first step in establishing yourself as a household employer is to obtain an Employer Identification Number (EIN) from the IRS. This number is essentially your business’s social security number and is necessary for reporting taxes and other documents to the IRS. Applying for an EIN is a straightforward process that can be done online through the IRS website.

Register for state tax accounts

Next, you’ll need to register for any relevant state tax accounts. Depending on where you live, this might include unemployment insurance, disability insurance, and other state-specific taxes. Each state has its own requirements, so it’s important to check with your local tax authority or department of labor to ensure you’re fully registered and understand your obligations.

Setup workers’ compensation insurance

Workers’ compensation insurance is a critical component of being a household employer. This insurance provides coverage for medical costs and a portion of lost wages for employees who get injured on the job. Many insurance providers offer “comp as you go” plans, which allow you to pay your workers’ comp premiums based on your actual payroll, making it easier to manage cash flow. Consult with your insurance agent to set this up and ensure you’re covered.

Consult with an accountant

Handling household payroll taxes can be complex, especially when it’s time to file your taxes. Schedule H is a form that household employers need to complete when filing their federal income tax return if they pay a certain amount in wages. Since tax laws and regulations can change, consulting with an accountant who has experience with household employment can save you a lot of headaches. Furthermore, they can help ensure that you’re taking advantage of any available tax benefits and are fully compliant with the law.

Setup payroll services

Once you’ve got the initial setup out of the way, it’s time to start running your payroll. This involves considering the payroll service options near you.  Next, comes calculating employee wages and withholding the correct amount of payroll taxes, including FICA taxes, State Unemployment Tax, and Federal Unemployment Tax. If you pay cash wages of $2,700 or more for 2024 (this threshold can change from year to year) to any one household employee, you generally must withhold 6.2% for Social Security tax and 1.45% for Medicare tax (for a total of 7.65%) from all cash wages you pay to that employee, unless you prefer to pay your employee’s share of Social Security and Medicare taxes from your own funds. You must also pay your share of Social Security and Medicare taxes, which is also 7.65% of cash wages. Finally, you have to make those tax payments to the appropriate agencies. You also need to keep accurate records of all payments and taxes withheld.  For these reasons, outsourcing you payroll to a trusted vendor should be highly considered.


Setting up payroll as a household employer may seem like a difficult task at first. However, by breaking down the process into manageable steps—getting an EIN, registering for state tax accounts, setting up workers’ compensation insurance, consulting with an accountant, and setting up normal payroll operations—you can ensure that you meet all your legal obligations.

Should you have any questions on whether or not you are considered a household employer, or need assistance in setting up payroll, you can contact our team here for help!