Household payroll is used when you pay someone who works in your home, like a nanny, babysitter, housekeeper, or gardener (IRS definition here).
Gusto does not support household employer payroll because the tax rules are different from regular employees or contractors.
If you need help, Gusto recommends Poppins Payroll. They can manage payroll, taxes, and compliance for household employees.
Q: Who counts as a household employee?
A: The IRS says someone is a household employee if:
Household employees are not independent contractors.
Examples include:
Q: Why should I pay household employees legally?
A: Paying “under the table” is not legal. If you pay a household employee more than $2,800 in a year, or more than $1,000 in one quarter, you must pay:
Most states also require state unemployment tax. Some cities have local rules too.
You don’t have to withhold income tax unless the employee asks and you agree, but it may help them avoid a large tax bill later.
Q: How much do household payroll taxes cost?
A: Household employers pay about 10% of gross wages in taxes. This usually includes:
You must also withhold the employee's share of Social Security and Medicare.
Q: What steps are required for tax compliance?
A: To follow tax rules as a household employer, you must:
Q: Can you get tax credits?
A: Yes. You may qualify for the Child and Dependent Care Credit:
Credit is worth up to 20% of eligible child care costs.
You may also use a Dependent Care FSA to save money. This lets you set aside up to $5,000 pre-tax to help pay for child care.
Q: What other laws apply?
A: You may also need to follow these rules:
Poppins Payroll can help you track time off and leave balances.
Q: Who can help with household payroll?
A: Poppins Payroll is Gusto’s recommended partner for household employers. They can help you:
Visit Poppins Payroll to learn more about features and pricing.