§3510 Coordination of Collection of Domestic Service Employment Taxes with Collection of Income Taxes

Summary

If you employ household help, like a nanny or housekeeper, the employment taxes on their pay are handled on a yearly basis instead of through the quarterly system businesses use. You report these taxes for the calendar year, the return is due by the 15th day of the fourth month after your tax year closes, and you do not have to make payroll tax deposits during the year. These domestic service employment taxes are the Social Security and unemployment taxes on pay for household work in your private home, plus any income tax you agreed to withhold for the worker. For estimated tax purposes, these taxes are treated like self-employment tax, so you may need to cover them through estimated payments or wage withholding to avoid a penalty. This rule may not apply if no wage withholding credit is allowed and no penalty would apply anyway, or if you also owe employment taxes for non-household workers. The IRS can also agree to collect a state's unemployment taxes on household wages and pass the money to that state's account in the Unemployment Trust Fund.