If you employ a household worker either full- or part-time in your home, you may be obligated to pay taxes on your employee's wages. The Internal Revenue Service, or IRS (I-R-S), considers a household employee to be someone you pay for household work such as nannies, babysitters, health-care workers, house cleaners, lawn workers, and anyone else who performs work around your house. To qualify as a household employer, you must dictate both what tasks are to be performed as well as how they should be done. Most workers who control how the work is done are self-employed, meaning they usually supply their own tools and offer services to other people as well. If the wages you pay a household employee are less than $1,200 (twelve hundred dollars), you have to report these figures to the IRS, and you may owe taxes on both federal and state levels. However, annual cash wages in excess of $1,200 (twelve hundred dollars), must be reported and are subject to Social Security or Medicare taxes, as are wages from which you withheld federal income tax. To file these employee taxes, you need an Employer Identification Number, or EIN (E-I-N), which can be obtained from the IRS by using Form SS-4 (s-s-four). You also need to fill out a W-2 Wage and Tax Statement form for each qualifying household employee, as well as Form W-3, Transmittal of Wage and Tax Statements. Copy A of the W-2 along with the W-3 form must be sent to the Social Security Administration by February 28 (twenty-eighth) or by April 2 (second) of 2001 (two thousand and one) for electronic filing. If you pay certain wages, for example Medicare or Social Security, to your employee instead of withholding these funds, the IRS requires you to file Schedule H with a 1040 (ten-forty) form by April 16 (sixteenth), 2001. The laws regarding taxes on household employees can be quite complicated and confusing, so if you need more information, talk to a tax professional.
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