Payroll tax compliance for your new employee does not need to be terrifying, time consuming or expensive!
When you hire through CareLinx to care for your loved ones, you become a household employer. A household employer is someone who hires an individual to perform duties and provide services under their direction in a private home. Generally, these workers are your employee, not independent contractors. Failure to properly classify the worker and make the appropriate employment tax filings and payments is considered tax fraud by the IRS.
PAYROLL TAX RESPONSIBILITIES
You are responsible for employment taxes when you pay a household worker who is 18 years or older $2000 or more.
Social Security and Medicare Taxes: The household employer is responsible for the payment of all Social Security and Medicare taxes to the IRS. You may choose to either collect your employee’s taxes via payroll deductions or fund these taxes yourself.
Unemployment Taxes: You will make contributions to the IRS and state to fund unemployment and worker re-training programs.
Income taxes: Federal and state income taxes are ultimately the responsibility of the household employee.
Tax Filings: You have both Federal and State tax filing responsibilities. Federal employment taxes are reconciled with the household employer’s annual Federal Income tax return. Your state will require quarterly unemployment tax filings, reports and remittance. Employee wages are reported to the Social Security Administration. Your employee is due a W-2 form in January.
OTHER LEGAL RESPONSIBILITIES
Verification of Work Eligibility: All U.S. employers are required to verify a candidate's employment eligibility using Form I-9.
Fair Labor Standards Act (FLSA) Compliance: Maintain accurate and contemporaneous records including time tracking, gross pay calculations, and detailed records of all deductions from the employee paycheck. Pay no less than minimum wage on an hourly rate basis.
KENTUCKY LABOR LAWS
Minimum Wage & Overtime Pay: Kentucky defers to the FLSA, which requires that all domestics, excluding companions, be paid at no less than the greater of the state or federal minimum wage, and that all live-out workers be paid an overtime differential of 1.5 times the hourly wage for hours over 40 in a work week. Live-in domestics must be paid their hourly wage for all hours worked, without an overtime differential.
Fair Standards Act (FLSA): Compliance includes the obligation to pay your household employee at no less than the applicable minimum wage and to retain accurate and contemporaneous time tracking records. Household employees are non-exempt and must be paid on an hourly rate basis. Employers are responsible to retain records of gross pay calculations as well as detailed records of all deductions from the employee paycheck.
Payroll Frequency: Kentucky allows you to pay your household worker daily, weekly, bi-weekly or semi-monthly, and disallows monthly pay cycles. Pay upon separation is due on the next scheduled pay date.
Workers Compensation Insurance: Kentucky does not require household employers to obtain Workers’ Compensation Insurance. You are encouraged to discuss your situation with your personal casualty insurance agent. Workers’ compensation insurance is offered on the private market.
Paid Time Off: Kentucky does not mandate any paid time off for non-exempt workers.
You are not required to provide employee health insurance, however there are financial and retention advantages to contributing some or all of your employee’s health insurance premium.
Questions? Ask us!