Before you hire household staff: a readiness check, including past years paid off the books
Most of the advice about hiring household help focuses on the candidate. This post focuses on the household. Before a family adds a house manager, nanny, chef, or caregiver to payroll, a few questions about its own tax setup decide whether the first year goes smoothly. One of them is uncomfortable: whether someone has already been paid off the books, and what to do about it. This post is a readiness check for the household's side of becoming an employer: cash flow for taxes, who approves payroll, which states are involved, the record system, and how to correct prior years where household wages were not reported. It does not evaluate candidates and it is not employment law advice. It is a list to work through with your preparer before the offer goes out. Part one: the household's own tax setup Can your estimated payments absorb Schedule H? Household employment taxes are paid with your Form 1040 through Schedule H. A full-time employee at $80,000 adds about $6,120 of employe...