As experts in luxury household staff recruitment, at My Household Managed we try to dispel many of the myths that are prevalent in the private service industry. In this blog, we’ll be looking at the common misconception about whether you are able to employ your household employee under your LLC, corporation or family business. Read on to find out if you can hire a nanny, housekeeper or house manager under your own business.

At My Household Managed we always advise our clients and candidates to seek professional guidance to help them navigate the complexity of tax regulations and ensure they are compliant.

I’ve got my own business. Can I put my household employee on the payroll?

The short answer is no. Many people think that hiring a household employee under an LLC might provide additional benefits and protections, but this is not at all the case.

In fact, by hiring your nanny, housekeeper or house manager under your LLC or family business, it could be a misclassification on your tax filing. The IRS has a specific designation and expectations for household employers that are much different than that of an LLC.

In fact, our partners at GTM remind employers that “it is illegal to pay your household employee on your business payroll…a household worker is in your home, not your business.” Typically, federal household employment taxes have to be paid on an employer’s personal income tax return, not their business one.

One of the few exceptions to this rule is if an employer is a sole proprietor or if their home is on a farm which is being operated for profit. In these cases, GTM states that the employer" “may opt to include federal household employment taxes with their federal employment tax deposits or other payments for the business or farm employees.”

If you’d like to know more about this, you can learn more in the IRS Publication 926.

What are the legal risks if i misclassify my household employee?

Not only does a misclassification violate IRS regulations, but it could also lead to significant legal and financial penalties. Understanding the distinct requirements for household employment is crucial to avoid these pitfalls. Misclassifying a household employee as a business employee can result in several legal issues, including:

Back Taxes and Penalties: The IRS may require you to pay back taxes along with penalties and interest if they find that you misclassified your household employee.
Worker Compensation Claims: Household employees are not typically covered under business worker compensation policies, which could leave you liable for injuries that occur in your home.
Employee Benefits: Business employees often receive benefits that household employees do not, which could potentially create legal disputes.

How can I make sure I’m compliant with IRS regulations for my household employees?

To ensure compliance with IRS regulations, it’s important to:

Classify Correctly: Make sure to classify your household employees correctly as household employees, not business employees.
Payroll Services: Consider using specialized household payroll services to manage wages, taxes, and documentation correctly. We recommend our approved partners, GTM Payroll. Click here to find out more.
Consult Professionals: Regularly consult with tax and legal professionals to stay updated on regulations and ensure you are in compliance

Can I get a tax break for my household employees?

Potentially, yes! In most occasions, if you are paying your household employee legally (which is a must when you register with My Household Managed), then you may be eligible for one of two main tax breaks: the Dependent Care Assistance Programme (DCAP) or the Child and Dependent Care Tax Credit. This could help you recoup some of the costs of being a household employer, so long as you meet the relevant criteria.

Is hiring a nanny tax-deductible?

Yes! In lots of cases, hiring a nanny has certain tax benefits to help you offset the cost of employing someone to help you look after your children, if they are under 13. We talk in more detail about the tax deductions you can take if you’re hiring a nanny in Chicago in this blog, but most of the information is applicable across the USA.

If you want to read more about how to make sure you’re tax-compliant when employing a nanny, make sure you check out our blog with our most frequently asked questions about nanny tax essentials!

We believe that the high-quality candidates we work with in the private service industry deserve to be paid fairly just as they would be in another industry. There are so many benefits to legal pay for private service professionals, for both the employers and employees. As such, we insist that all of our clients agree to pay their employees “on the books” and therefore, that they also agree to file their taxes properly. To learn more about our hiring process, head to our client information page.

Not sure where to start with hiring your new nanny, house manager or housekeeper?

My Household Managed takes a consultative and personalized approach to household staffing.

We help you hire domestic staff qualified to fit your unique needs, saving you time and providing peace of mind.

Let us help you find the best family assistant, house manager, nanny or any other domestic employee you may be searching for by inquiring with My Household Managed.