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When:
January 01, 2003

Who it Affects:
For taxpayers who employ household help.
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2003 Tax Law Changes
Higher reporting level for household workers

If you pay a household employee cash wages of $1,400 a year or less, you do not have to report and pay Social Security and Medicare taxes. Your state, however, may require filing at different wage levels. Check with your state's tax department.

At the same time, if you paid $1,000 or more of cash wages in any quarter of 2002 or 2003 to household employees, then you should pay federal unemployment tax. That's 0.8% of the wages. Wages in excess of $7,000 are not subject to the unemployment tax. You may also have to pay state unemployment tax.

These do not apply if the employee is your spouse, child age 20 or younger or parent.

For more information, see IRS publication 926.
Related Tax Article(s): Grow up and pay 'nanny tax' if you owe it