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 $49 a month. You can even try Poppins for free!*
If you pay a household employee such as a nanny, babysitter, caregiver or house manager more than $2,700 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.
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 $49 a month! That includes all your 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. You can even try Poppins for free!*
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 $2,700 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 $49 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.
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 and a Sample Caregiver Contract for your reference. This should give you a good idea of the issues that are usually covered.
California’s minimum wage is $16 per hour. A number of municipalities in California require minimum wages higher than the state requirement. Note that the health care workers minimum wage only applies to workers at a “health care facility”.
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
|
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.
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.
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.
If you do not already have coverage, you can obtain coverage through the State Compensation Insurance Fund. Also, we’ve partnered with Bhalu Insurance, because they’re THE experts in Workers Comp Insurance for household employers. In fact, that’s literally all they do. Check out their site for a free quote or give them a shout. We think they’re pretty awesome.
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.
California household employers must make paid sick leave available for any employee who works for them for at least 30 days within a year. Employees can begin using sick leave once they have worked for 90 days. Employers can limit an employee’s use of sick leave to 40 hours or 5 days per year, whichever is more. Employers may choose to have an “accrual” policy or an “up front” policy. Employers using an accrual method must ensure employees have no less than 24 hours by the 120th calendar day of employment and at least 40 hours by the 200th calendar day of employment. You can find more rules and information on the California Department of Industrial Relations Paid Sick Leave FAQs.
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.
California employers must also track and report their employee’s sick leave every pay period. With Poppins, you can track sick leave and PTO in our system and it’ll automatically be included on your employee’s pay stub.
The California Family Rights Act (CFRA) requires household employers with more than 4 employees to give them up to 12 weeks of unpaid, job-protected leave to care for their own serious health condition or a family member (or designated person) with a serious health condition, or to bond with a new child. Such employees are also entitled to up to 5 days of unpaid bereavement leave for an employee within 3 months of the death of a family member.
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.
If an employee is fired or doesn't have a say in leaving their job, they must be paid their final paycheck on the same day as termination. An employee who quits must be given their final paycheck within 72 hours of providing notice.
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.
All employers are required to post a number of notices for the benefit of their employees.
Household employers must keep accurate records of hours worked by employees and wages paid on an ongoing basis. These records must be kept for at least 3 years. With Poppins, we’ll keep all this information in your online filing cabinet, which you’ll be able to access even after you’re not using us to run your payroll.
CalSavers is a state-run retirement plan. California employers with 5 or more employees must register by December 31, 2024 unless they offer a different qualifying retirement plan. By December 31, 2025, all employers will be required to register unless they offer a different qualifying retirement plan.
Poppins does not handle your registration with CalSavers or make your payments to CalSavers. With Poppins, you can enter the percentage elected by your employee and the CalSavers contributions will be reflected on your employee’s paystubs. You will still need to submit the payments to CalSavers on behalf of your employee.
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.
