California Nanny Tax Rules

Household Employer Guide

Need help with the legalese around California nanny tax rules? Trying to figure out how to pay your household employee the right way?

We’ve put together a bunch of useful info for you here.  If it still seems like too much, we can handle everything for $39 a month.  The first month is even free!

Am I a household employer?

If you pay a household employee such as a nanny, babysitter, caregiver or house manager more than $2,100 a year or $1,000 in a quarter to perform work in your home (or occasionally even out of your home such as in a nanny share), you are a household employer.

Why pay nanny taxes?

There are important benefits to following the law.  It gives your employee Social Security, Medicare and Unemployment Insurance benefits.  It also allows her to build her credit.  Paying legally sets you up to take advantage of tax credits for dependent care.  Finally, you never know when you might get nominated for the Supreme Court.  And, we all know how that ends if you haven’t paid your nanny taxes.

So what are my tax obligations as a California household employer?

As a household employer, you must comply with certain tax obligations, commonly referred to as the “nanny taxes” or “household payroll taxes.” It’s complicated, but generally, after you have registered as an employer with all the appropriate agencies, you must:

  • Register – You need to obtain a Federal Employer Identification Number and register with the California Employment Development Department.
  • Report your employee – All employees must be registered with the State within 20 days of hiring.
  • Payroll - At every pay period, withhold Social Security, Medicare, SDI and income taxes from the employee’s paycheck per the employee’s W4 and DE 4 elections and make employer contributions to the Social Security and Medicare and unemployment funds. 
  • Quarterly - submit the proper paperwork and payments to the correct agencies. The agencies will typically include the IRS and the State.
  • Year-End - provide your employee with his or her W-2 form, submit such information to the Social Security Administration and prepare a Schedule H to file with your individual tax returns.

You can find all the information about your federal obligations in the IRS’s Publication 926 – Household Employer’s Tax Guide and your California obligations in the California Household Employer Guide

The IRS estimates that it would take you 60 hours to comply with the federal nanny tax regulations. That does sound, well, taxing.  Poppins can take care of all of it for $39 a month!  That includes all you state and federal registrations, new hire reporting, payroll calculations and direct deposit, quarterly state and federal filings and the year-end documents for you and your employee.  This first month is even FREE!

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What are the required tax and legal forms?

If you decide to handle payroll and taxes yourself, you’ll need to know about these forms:

Form I-9: Have your employee complete this form when hired and provide the required proof of ID.

Form W-4: Have your employee complete this form which dictates how federal income tax is withheld.

Form 1040-ES: On a quarterly basis send this form to the IRS along with payment to report taxes from previous quarter. Don’t forget that federal quarter dates do not always line up with calendar quarters!

Form W-2: Fill out Form W-2 if you pay wages of $1,000 or more, and give Copies B, C and 2 to your nanny. Copy A (along with Form W-3) goes to the Social Security Administration.

Schedule H: If you pay your nanny cash wages of $1,000 or more in a calendar quarter or 2,100 in a calendar year file Schedule H.

DE 4: Have your employee complete this form which dictates how California income tax is withheld.

DE 9, DE 9C & DE 88: On a quarterly basis file these reports with the State along with payment to report taxes and wages paid in the previous quarter.

But if that sounds like too much, Poppins can take care of all these filings for $39 a month!  We gather all the information we need from you during signup, generate your forms through our system, make all the appropriate tax calculations, and submit everything on your behalf.

Do I need to have a written contract with my employee?

California household employers are required to provide all household employees with a written wage notice at the time of hire. You are required to complete the form and have your employee sign two copies – one for their records and one for the employee’s records.

You are not required by law to have a full written employment agreement with your nanny or household employee.  Still, it is a really good idea to have a written employment agreement with your employee.

A written employment agreement spells out the obligations of both parties, including hours, compensation, duties, benefits and PTO.  This is really important if the relationship doesn’t work out, and there is ever a dispute.  Just as important, it helps you discuss the important issues with your employee at the outset.  This way you make sure you have a good relationship and understanding before you even start. 

If you decide to go this route, we’ve put together a Sample Nanny Contract.  This should give you a good idea of the issues that are usually covered.

What other laws do I need to know about?

Time is money

MINIMUM WAGE

California’s minimum wage for 2019 is $11.00.  It will increase to $12.00 on January 1, 2020 and $13.00 on January 1, 2021.  You can find more information on minimum wage laws on the California Department of Industrial Relations website.

A number of municipalities in California require minimum wages higher than the state requirement.

OVERTIME

California has different overtime rules depending on whether your employee lives with you and based on what type of work they perform.  A “personal care attendant” is a domestic employee who spends at least 80% of their time caring for a child or elderly person.

Live-In - Personal Care Attendant

More than 9 hours in a day

Must pay 1.5 times hourly rate

More than 45 hours in a week

Must pay 1.5 times hourly rate

Live-Out - Personal Care Attendant

More than 9 hours in a day

Must pay 1.5 times hourly rate

More than 40 hours in a week (per FLSA)

Must pay 1.5 times hourly rate

Live-In - Other Domestic Workers

More than 9 hours in a day

Must pay 1.5 times hourly rate

More than 45 hours in a week

Must pay 1.5 times hourly rate

First 9 hours on the 6th or 7th consecutive day of work

Must pay 1.5 times hourly rate

More than 9 hours on the 6th or 7th consecutive day of work

Must pay 2 times hourly rate

Live-Out - Other Domestic Workers

More than 8 hours in a day

Must Pay 1.5 times hourly rate

More than 12 hours in a day

Must Pay 2 times hourly rate

More than 40 Hours in a Week (per FLSA)

Must Pay 1.5 times hourly rate

More than 8 hours on the 7th consecutive day of work

Must Pay 2 times hourly rate

SALARY OR HOURLY WAGES?

Your employee is entitled to minimum wage and overtime regardless of whether they are paid hourly or salary. If they are paid by salary, it is best practice to document the hours worked (and the pay rate) included in the salary amount. 

PAYSTUBS

California law requires employers to give employees an itemized paystub with every paycheck.  With Poppins Payroll, you can have paystubs emailed directly to your employee every payday.

PAY PERIODS

California household employees have the right to be paid at least twice a month.

WORKERS’ COMPENSATION INSURANCE

All California employers are required by law to have workers' compensation insurance.  Workers' comp insurance provides benefits to your employee in the event of an on-the-job injury.  It can also limit an employer’s liability. 

Your homeowner’s policy may already provide you with some workers’ compensation coverage.  You should contact your insurer to determine whether you need to add workers’ compensation coverage for your household employee.  If you do not already have coverage, you can obtain coverage through the State Compensation Insurance Fund.

MILEAGE REIMBURSEMENT

California employers must reimburse employees if they are required to drive their own vehicle on the job (not including commuting to and from work). You can use the current federal mileage reimbursement rate.  Mileage reimbursement is not considered taxable compensation.  To ensure the amount is not taxes, enter mileage reimbursements as a “Reimbursement” amount on your payroll.

SICK TIME

California household employers must comply with the following sick leave requirements:

  • Employees can begin using accrued sick leave once they have worked for 90 days.
  • Employees will accrue one hour of paid sick leave for every 30 hours worked.
  • Employers can limit an employee’s use of sick leave to 24 hours (or three days) per year.
  • To avoid the administrative hassles of the accrual and carryover requirements, an employer can make three days of paid sick leave available to each employee at the beginning of each year.

Several California municipalities have their own paid sick leave requirements that provide additional benefits to employees.  The cities of Berkeley, Emeryville, Los Angeles, Oakland, San Diego, San Francisco and Santa Monica have additional sick leave requirements.

You are responsible for tracking sick leave for your employees. You can track it outside of Poppins or you can note sick leave accrual in the notes field a paystub.

TERMINATION NOTICE

Household employers in California are required to provide a Change in Relationship Notice to their employee at the time they are fired or laid off.

NOTICES AND PAMPHLETS

You must provide a copy of the following notice and pamphlets to each employee to explain employees’ benefit rights:

For Your Benefit: California’s Programs for the Unemployed (DE 2320) provides information on Unemployment Insurance, Disability Insurance, Paid Family Leave, and Workforce Services benefits available to the employee. 

Disability Insurance Provisions (DE 2515) outlines DI benefits. 

Paid Family Leave (DE 2511) outlines PFL benefits. 

POSTING REQUIREMENTS

All employers are required to post a number of notices for the benefit of their employees.

THE CONTENT OF THIS WEBSITE IS GENERAL AND INFORMATIONAL IN NATURE AND MAY NOT BE APPROPRIATE FOR YOUR SPECIFIC CIRCUMSTANCES. THE INFORMATION IS NOT INTENDED TO PROVIDE LEGAL OR TAX ADVICE, AND SHOULD NOT BE RELIED UPON WITHOUT CONSULTING WITH AN ATTORNEY AND/OR TAX PROFESSIONAL.

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