As a household employee, you are responsible for paying income tax on your wages. If you fail to pay your estimated taxes, you will be subject to penalties. Some taxes are due quarterly, and you may have to pay extra if you don’t make the full amount by the due date. For more information, please read this article. This information is for both employers and household employees. Also, read about freelancing and FUTA. These are all important topics that need to be addressed when hiring a household employee.
Employers
Household employees are workers who do a wide range of domestic tasks for a person’s home. These workers can be full-time or part-time, and can be hired through an agency or from a list. Some are paid hourly, while others are self-employed. In both cases, employers should make sure that they have control over the work performed by their employees. To learn more about household employees, read on!
Many household employers choose not to withhold taxes. The employee might believe no one will find out and will claim government benefits. Unfortunately, a household employee may apply for government assistance without realizing it, and if the employee does complain, the authorities will get involved. It’s possible that the employee will also report the employer to the IRS if they don’t pay taxes. If this happens, it could cause serious consequences. You can learn more about how to manage payrolls from the Department of Labor.
Withholding
The Social Security Domestic Employment Reform Act of 1994 simplifies employment taxes and income tax withholding for household employees. Employers must withhold the employee’s share of social security tax from wages, but they can also choose to pay the FICA tax and Medicare taxes directly from their own funds. If you pay less than $1,500 per year for household employees, you are not obligated to withhold federal income tax from their wages. But if you have more than one employee, you must comply with all federal income tax requirements.
For Illinois income tax regulations, refer to Title 86 of the Code. The forms that explain how to calculate your Illinois withholding allowances are available in Booklet IL-700-T. If you are a household employee, read Publication 121 and review your Form IL-W-4 every December. If your Illinois withholding allowances change during the year, you must file a new Form IL-W-4. If you have questions about filing your Illinois income tax return, you have several rights, including the Taxpayer Bill of Rights.
FUTA wages
FUTA wages for household employees are taxed according to the amount of cash they earn. This tax is triggered when household employees receive cash wages that total more than $1,000 in a calendar quarter. For example, if a household employee earns $2,000 in a calendar quarter but only makes $500, then this wage is not considered FUTA income. In addition, the employee may be subject to state unemployment tax if he is not working for an employer.
FUTA taxes on FUTA wages for household employees are triggered when the wage of a household employee exceeds $1,000 in a calendar quarter. In 2021, the threshold will increase to $7,000 for household employees. However, FUTA wages for household employees do not require withholding of FICA taxes. Employees may choose to withhold taxes on their wages, but this must be done in writing. The employer may charge a penalty or interest if the employee does not pay taxes on FUTA wages.
Freelancers
You may have to pay federal income taxes on your freelancing income. The federal government is the largest tax payer for freelancers. You must file your annual income tax return by April 15th, which includes the amount of income you earned the previous year, the deductions you took, and the amount of estimated tax you paid. The following are some of the other tax responsibilities that freelancers must take care of. Keep these tips in mind, and your freelance business will be tax-free in no time!
The IRS views household employees and freelancers differently. A household employee is an employee that is controlled by an employer, while an independent contractor is an independent worker with their own tools and working for themselves. If you hire a freelance worker, you can choose to pay them on an hourly, daily, weekly, or per-job basis. Among the different types of household workers are babysitters, nannies, and private nurses. You can also hire a freelancing business to provide additional services for your home.
