How to Issue a W-2 for a Household Employee
If you employ a nanny, housekeeper, or gardener in your home, you may be considered a household employer by the IRS. One of your responsibilities as a household employer is to issue a W-2 to your employee at tax time. This step-by-step guide will walk you through the process to ensure you're compliant with federal and state tax laws.
Disclaimer: This guide provides general information for educational purposes only and does not constitute tax, legal, or financial advice. Please consult with a qualified tax professional to discuss your specific situation and to ensure compliance with all applicable tax laws.
Step 1: Determine if You Have a Household Employee
First, make sure your worker qualifies as a household employee. A household employee is someone you hire to do household work, and you control how and when they perform that work. If they run their own business or work for an agency, they are not considered your employee.
Step 2: Obtain an Employer Identification Number (EIN)
You need an Employer Identification Number (EIN) to report taxes for your household employee. If you don’t have one yet, you can apply for an EIN online through the IRS website here.
Step 3: Have Your Employee Fill Out Form W-4
Before you issue a W-2, your employee must complete Form W-4, which helps you determine how much federal income tax to withhold from their pay. Keep this form in your records, as it will be needed when you file taxes.
Step 4: Track Employee’s Wages and Tax Withholdings
Throughout the year, you need to track your employee’s wages and any taxes withheld, such as federal income tax, Social Security, and Medicare. For 2024, you are required to withhold Social Security and Medicare taxes if you pay your employee $2,600 or more during the year.
Step 5: Complete Form W-2
At the end of the year, you will complete Form W-2, which details the wages you’ve paid and the taxes you’ve withheld. Here’s a breakdown of how to fill out the key sections of the form:
Box 1: Enter total wages paid to the employee.
Box 2: Report total federal income tax withheld (if applicable).
Boxes 3 & 4: Report wages subject to Social Security tax and the amount of Social Security tax withheld.
Boxes 5 & 6: Report wages subject to Medicare tax and the amount of Medicare tax withheld.
State and local tax boxes (15-20): If you withheld state or local taxes, report those amounts here.
You can file Form W-2 electronically with the Social Security Administration (SSA) or submit a paper copy.
Step 6: File Form W-2 with the SSA and Provide a Copy to Your Employee
You must provide a copy of the W-2 to your employee by January 31 of the following year. You will also need to file the W-2 with the SSA, either electronically through their Business Services Online (BSO) portal or by mail.
Step 7: File Form W-3 with the SSA
When filing the W-2, you will also need to file Form W-3. This form acts as a summary of all the W-2s you've issued and reports the total wages and taxes withheld.
Step 8: File Schedule H with Your Tax Return
If you paid your employee $2,600 or more, you must file Schedule H (Household Employment Taxes) with your personal income tax return (Form 1040). This form calculates your liability for Social Security, Medicare, and federal unemployment taxes (FUTA).
Step 9: Check Your State and Local Requirements
In addition to federal requirements, many states have their own tax filing obligations, such as state unemployment insurance and workers' compensation. Make sure you understand and comply with your state and local tax laws related to household employees.
Conclusion
Issuing a W-2 for your household employee can feel complicated, but by following these steps, you’ll be on the right track to meet your tax obligations. Remember, staying organized throughout the year and understanding your responsibilities as an employer is key to avoiding penalties.
If you have specific questions about your tax situation, it's always best to consult with a qualified tax professional who can offer personalized advice.