Paying household employees is a trap for the unwary. Many people have folks helping around the house — babysitting, cleaning, organizing, and fixing. Often, household staff need no special attention at tax time, but if you don’t pay attention, you could make a big mistake!

If you pay a household employee wages of more than $1,800 ($1,700 for 2009, 2010, and 2011), you generally must withhold social security and Medicare taxes. Unless you prefer to pay your employee’s share of social security and Medicare taxes from your own funds, you should withhold those taxes from each paycheck. (But if the person is employed by an agency or a company that you have hired, and you pay the agency instead of the worker, and the agency is properly withholding and remitting taxes, then you do not have to do this.)

You also need to ensure that the employees are legally permitted to work in the US and confirm that with USCIS form I-9.

And you are likely to have state requirements as well.

Au Pairs are subject to special rules, because an Au Pair is authorized to stay in and work in the United States under a special government program. Au Pairs are a hybrid work/learn program, subject to special protections and compensation rules.

There are rules that govern au pairs. Au pairs are to be provided a private bedroom, meals, a full weekend off each month, two weeks paid vacation, up to $500 toward attending an institution of higher education, and a cash stipend tied to the U.S. minimum wage. They are not allowed to work more than 10 hours a day and not more than 45 hours per week. They are not expected to perform general housekeeping tasks but are expected to perform child-care functions. Au pairs are required to enroll for not less than 6 semester hours of classes at a post-secondary educational institution; but may audit the classes for no credit if they wish. Au Pairs cannot be placed with a family that has an infant less than three months old unless a parent or other responsible adult is at home; in homes with children under two years of age unless the Au Pair has at least 200 hours of documented infant childcare experience; or in families with a special needs child(ren), as identified by the family, unless the au pair has identified his/her prior experience, skills, or training in the care of special needs children and the host family has reviewed and acknowledged the au pair’s prior experience, skills, or training in writing.

One of the rules governing au pairs relates to their weekly stipend. The weekly stipends for the standard Au Pair Program is directly connected to the federal minimum wage. The Au Pair stipend is based on a U.S. Department of Labor’s formula that includes credit for the room and board Host Families provide for their Au Pairs. The room and board credit currently is 40% of an au pair’s credited compensation. Since 2009, au pairs have been entitled by law to a weekly stipend of at least $195.75. (Someone earning minimum wage of $7.25 per hour, working 40 hours per week for a full year, would earn $15,080. If host families use up 40% of that, as the government deems to be the case, that leaves $9,048, or $174 per week. The formula is a little more complicated than I have just described, which is why the weekly stipend is set at $195.75.)

Thus, a properly paid au pair will generally earn enough to require tax withholdings within about two-and-a-half months.

If you have questions about paying your domestic staff, or other tax questions, please let us know.