In the State of New York, if you hire a domestic employee, you may be subject to the laws requiring the withholding of Federal, Social security, Medicare, New York State, and New York City taxes. You may also be responsible for paying the appropriate federal and state agencies for unemployment insurance, workers’ compensation and disability insurance.
As a domestic employer, you are responsible for verifying the employee is eligible to work in the United States. All employers must complete and retain a form I-9, Employment Eligibility Verification, for each individual they hire. On the form, the employer must examine the employment eligibility and identify document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and relate to the individual and record the document information on the form I-9. The list of acceptable documents can be found on the last page of the form.
Federal requirements:
If you pay wages of $1,700 or more in 2009 to any one domestic employee, you are required to withhold and pay Social security and Medicare taxes. The domestic employer’s portion of Social security and Medicare taxes is 6.2% and 1.45% of wages, respectively, for a total of 7.65%. In addition, the employee’s share of Social security and Medicare taxes is 6.2% and 1.45%, respectively. At the domestic employers discretion you can choose to pay the employee’s half of these taxes, for a total of 15.3%. The domestic employer is responsible for remitting payment of the employers, as well as, the employee’s share of these taxes regardless of whether the employer pays the employee’s half. The remittance is made on an annual basis with Schedule H of the employers Individual Income Tax Return, Form 1040. Please be aware that if a domestic employer remits his or her individual income taxes via quarterly estimated income tax payments, these additional taxes should be considered when calculating the quarterly estimates to be made.
If you pay wages of $1,000 or more in any calendar quarter of 2009 to a domestic employee you are required to pay Federal unemployment tax. Federal unemployment contributions are based on the first $7,000 of wages paid to a domestic employee in a calendar year. This tax is usually 0.8%. Accordingly, the tax is usually $56 per employee per year. This tax is also remitted annually with the employers Schedule H.
Domestic employers are not required to withhold Federal, New York State of New York City income taxes, but may do so voluntarily by an agreement between the employer and employee(s). A domestic employer who agrees to withhold Federal income tax will be required to remit the withholding on an annual basis with the employers Schedule H. Your employee should complete form W-4, Employee’s Withholding Allowance Certificate, which will advise you of the correct federal income tax to withhold from their pay.
Once you have decided to hire domestic employees, you are required to obtain a federal employer identification number (EIN). This can be obtained by filing Form SS-4, Application for Employer Identification Number, with the Internal Revenue Service, or by completing the form online at https://sa1.www4.irs.gov/modiein/individual/index.jsp.
New York State requirements:
As a domestic employer, you are liable under the New York State Unemployment Insurance Law on the first day of the calendar quarter in which you pay wages of $300 or more. Accordingly, you must file form NYS-45-MN, Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return, on a quarterly basis, reporting total wages paid during the quarter. Note that a quarterly return must be filed even if no wages were paid in a quarter, or no tax is due. Unemployment contributions are based on the first $8,500 of wages paid to an employee in a calendar year in New York State. For the first year as a domestic employer, the unemployment insurance rate is usually 4.1%.
Once you have decided to hire domestic employees, you are required to obtain a New York State Unemployment Insurance Registration Number. This can be obtained by filing Form NYS-100, New York State Employer Registration for Unemployment Insurance, Withholding and Wage Reporting.
As stated above, domestic employers are not required to withhold New York State or New York City income taxes, but may do so voluntarily by an agreement between the employer and employee(s). Kindly note that form NYS-45-MN is also used to remit any New York State and New York City income tax withholdings on a quarterly basis. Your employee should complete form IT-2104, Employee’s Withholding Allowance Certificate, which will advise you of the correct New York State and/or New York City income tax to withhold from their pay.
For 2009, a domestic employer may exclude up to $120 per month from an employee’s taxable wages for qualified transportation fringe benefits. Therefore, if you pay for your domestic employee’s commuting expenses, up to $120 per month should be deducted from their taxable wages.
Workers’ compensation requirements:
In New York State, domestic employees employed forty or more hours per week by the same employer are covered by the Workers’ Compensation Law. This means if your domestic employee works 40 or more hours per week for you, you are required to obtain, and keep in effect, workers’ compensation coverage. You should contact your insurance carrier to obtain this coverage.
Disability insurance requirements:
In New York State, domestic employees employed forty or more hours per week by the same employer are also covered by the Disability Benefits Law. This means if your domestic employee works 40 or more hours per week for you, you are required to obtain, and keep in effect, a disability policy. This can also be obtained by your insurance carrier, or we can assist you with obtaining this coverage.
Requirements for states other than New York:
If you are a resident of another state, different rules apply. Please contact us for additional information.