!Hiring workers in your home

Need help from a nanny, housekeeper, or handyperson in your home? Review the practical and legal issues before you hire someone, whether an individual, a company, or someone from an agency. In particular, you'll need to:

  • determine whether the worker is legally classified as an employee or an independent contractor, and
  • then follow the applicable IRS and other rules.

As you’ll see, hiring a company or agency to handle the needed work offers significant advantages. They typically provide qualified workers, manage payroll and employment taxes, and arrange insurance for worker injuries or property damage. You’ll want to ask them for details about their responsibilities and proof of insurance.

We'll also discuss the consequences of failing to comply with applicable laws.

In This Article

Household Employee vs. Independent Contractor: What’s the Difference?

If you hire an individual rather than a company or agency, you must determine whether the worker is your employee or an independent contractor. This distinction affects which tax laws and regulations apply. Generally, you have greater responsibilities for employees than for independent contractors.

There is no single definition of an "employee." Different government agencies use different criteria, so you must review the relevant definitions to ensure compliance. For example:

  • The IRS and state tax agencies' definition of an employee determines whether you're required to pay and withhold taxes from your worker’s paycheck.
  • State and federal labor departments' definitions of who is an employee are key in determining whether your employees are entitled to certain protections, such as minimum wage and overtime provisions, to which independent contractors are not entitled.
  • State unemployment insurance or workers' compensation boards' definitions of "employee" matter because, someday, the worker might file for unemployment or be injured on the job, and you'll need to have insurance to cover these situations.

The more control you have over a worker’s schedule, tasks, and methods, the more likely you are to be considered the employer. For example, a nanny who works only for you, has a set schedule, and follows your instructions is likely your employee.

On the other hand, if a worker offers services to the public, provides their own equipment, and controls their work schedule and methods, they are likely an independent contractor. Gardeners and professionals such as electricians typically fall into this category. (To learn more about who qualifies as an employee, read Employees vs. Independent Contractors.)

Household Employee Tax Requirements and Responsibilities

If a worker is an independent contractor, your federal tax obligations are minimal. You don’t even need to file IRS Form 1099-NEC for household workers, as they are excluded from this requirement.

But it's a different story if you are the worker's employer. Here are some of your responsibilities:

Get an employer identification number. For starters, you'll need to let the IRS know you're an employer and get an employer identification number (EIN), which you can do via the IRS website at www.irs.gov/EIN.

Verify work authorization. Have the worker complete U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification, and provide documentation proving eligibility to work in the United States. You do not need to submit the I-9 to the government, but you must retain it in case of an audit or investigation.

Pay taxes. If you pay a worker $3,000 or more in 2026 (the amount changes each year), you must withhold and pay Social Security and Medicare taxes on all wages paid to that employee. Both you and the employee pay 6.2% for Social Security and 1.45% for Medicare. You are responsible for withholding the employee’s share and should check your state tax agency for additional requirements.

If you pay an employee $1,500 or more in any calendar quarter in 2026, you must also pay federal unemployment (FUTA) taxes. The standard rate is 6% on the first $7,000 of annual wages, but with a typical state unemployment tax credit of 5.4%, the effective rate drops to 0.6%.

You must also file IRS Form W-2 for each household employee by February 1 and report employment taxes on Schedule H with your personal tax return. Many employers use a payroll service to manage these tasks.

Keep good records. As a household employer, you're required to maintain accurate records for tax and employment purposes. Keep detailed records of all wages paid to each employee, taxes withheld, and tax deposits made throughout the year. You should also retain each employee's name, address, and Social Security number, along with copies of their I-9 forms and any W-4 forms they've submitted. These records will be essential when preparing your annual tax returns and can protect you in the event of an audit.

Workers’ Compensation and Insurance for Household Employees

If a worker is injured on the job, employers are typically responsible for covering workplace injuries. State law may require workers’ compensation insurance, but requirements vary by state. Some states exclude domestic employees or set thresholds based on hours worked or employer size.

If you're required to purchase workers' compensation insurance, you might be able to obtain the coverage through your homeowners' insurance policy. Though coverage for workers is generally excluded, you can potentially buy a rider or endorsement, depending in part on your state's laws.

You might also need to pay state unemployment insurance for your domestic worker. This provides income replacement and job placement services if employment ends. Costs vary by state.

Liability for Worker Injuries When a Licensed General Contractor or Subcontractor Is the Employer

Hiring contractors as intermediaries is beneficial because state law often requires them to provide workers’ compensation insurance for their employees. Most employees of businesses and nonprofits are covered. These programs, funded by employers, provide medical coverage and compensation for job-related injuries, regardless of fault.

Some states allow certain employers, such as sole proprietors, to opt out of workers’ compensation. However, in most states, workers employed by licensed contractors or subcontractors on your property are covered.

Minimum Wage and Pay Requirements for Household Employees

If you hire a domestic employee, you must comply with state and federal laws regarding their pay. For example, you must pay the employee at least the minimum wage in your state. As a practical matter, you might have to pay much more than the minimum wage, because it can be hard to find someone willing to work for less.

You may also be required to pay overtime, although federal law does not mandate it for live-in household employees or caregivers. (To learn more about the relevant rules, read Overtime Pay: Your Rights as an Employee.)

To learn more about the rules for hiring independent contractors, see the book Consultant & Independent Contractor Agreements, by Stephen Fishman, J.D.