A household employer is defined as someone who pays an individual to perform duties in or around their home. Household employees include nannies, senior care providers, private nurses, housekeepers, gardeners, cooks, personal assistants, household managers, etc.

NOTE: It is a fairly common misperception – even among some general tax professionals – that household workers can be classified as “independent contractors.” If you ask around, you’ll very likely hear someone say “just 1099 her.” (Form 1099 is the form used to report money paid to an independent contractor).

Beware: This is illegal and can result in big, expensive problems with the IRS. (See “The 1099 Trap”).

If a family pays a household employee $1,800 (2013) or more in a calendar year, they are required to meet the “nanny tax” obligations (a list of these obligations is provided under “The Household Employer’s Tax Responsibilities”) as well adhere to local, state and federal employment laws (see “The Household Employer’s Legal Responsibilities”). Don’t worry, these obligations are not nearly as onerous or as expensive as most people think.

If a family pays an employee less than the $1,800 threshold, the family is absolved of the “nanny tax” obligations, but they are still considered an employer and must adhere to local, state and federal employment laws (see “The Household Employer’s Legal Responsibilities”).