If an individual has a household employee, and pays cash wages of $750 or more in a calendar quarter, they are required to register with the Employment Development Department to begin withholding taxes. If paying $750-$999.99 per quarter, the withholding of CA State Disability Insurance (SDI) is required. If paying cash wages of $1,000 or more, withholding of Unemployment Insurance (UI) and Employment Training Tax (ETT) is required as well.
Types of Household Employers
An annual household employer is one who pays wages of $20,000 or less and elects to be an annual reporter. The required forms are DE 3BHW, which is filed quarterly, and DE 3HW, which is filed annually. The quarterly Form DE 3BHW reports the wages per employee, as well as state income tax withholding for the quarter. For any quarter where wages are not paid, a Form DE 3BHW must still be filed. Form DE 3HW reports the total of taxes due for the year and requires payments for those amounts. Both forms may be paper filed or filed electronically.
A quarterly household employer is one who exceeds cash wages of $20,000 paid to any individual annually. An employer may also elect to be a quarterly household employer even if they are below this threshold. This type of household employer is required to file a DE 9, DE 9C, and DE 88 each quarter. Form DE 9 calculates the various taxes due, as well as state income tax withholding. Form DE 9C reports the employee’s wages subject to UI, ETT, SDI, and personal income tax. Form DE 88 is the payment voucher for UI, ETT, and SDI calculated on Form DE 9. As with annual filers, the quarterly household employer must file these forms each quarter whether wages are paid or not during that time period.
Household payroll falls under state payroll regulations, but annual federal forms are required as well. Form W-2 reports an employee’s wages for the year and shows the income, Social Security, and Medicare tax withheld. It is important to note that if the employee is paid less than $1,900 for the year, Social Security and Medicare tax is not required to be paid by employee or employer. Form W-3 is the transmittal of wage and tax statements. A copy of the W-3 is used to transmit Copy A of Forms W-2 and reports the total of wages, Social Security, and Medicare by all employees.
As you can see, household payroll can quickly become complicated and tedious. Please call us if you require clarification about household payroll, or if you are unclear if you fall within these thresholds.