HOMEWORK SOLUTIONS IS HERE TO HELP!
Payroll tax compliance for your new employee does not need to be terrifying, time consuming or expensive. HomeWork Solutions is a nationally recognized “household payroll” service company, providing household employers nationwide with trusted and time saving payroll and payroll tax solutions.
WORKER CLASSIFICATION IS THE KEY
You become a household employer when you hire an individual to perform duties and provide services under your direction in your private home. Generally, these workers are your employees, not independent contractors. Failure to properly classify the worker and make the appropriate employment tax filings and payments is considered tax fraud by the IRS.
PAYROLL TAX RESPONSIBILITIES
You are responsible for federal employment taxes when you pay household workers as little as $1,000 in a calendar quarter or when you pay any individual employee age 18 or over $2,300 in a calendar year.
You have both Federal and State tax filing responsibilities. Federal employment taxes are reconciled with the household employer’s annual Federal Income tax return. Your state may require quarterly unemployment tax filings, as well as reports and remittance of state income taxes withheld, if applicable. Employee wages are reported to the Social Security Administration. Your employee is due a W-2 form in January.
Social Security and Medicare Taxes
The household employer is responsible for the payment of all Social Security and Medicare taxes to the IRS. You may choose to either collect your employee’s taxes via payroll deductions or fund these taxes yourself.
You will make contributions to the IRS and Michigan to fund unemployment and worker re-training programs.
Federal and state income taxes are ultimately the responsibility of the household employee; however, best practice is to deduct these taxes from your full time employee’s wages to help them avoid owing large sums when they file their annual income tax returns.
OTHER LEGAL RESPONSIBILITIES
Verification of Work Eligibility
All U.S. employers are required to verify a candidate’s employment eligibility using Form I-9.
Fair Labor Standards Act (FLSA) Compliance
Maintain accurate and contemporaneous records including time tracking, gross pay calculations, and detailed records of all deductions from the employee paycheck.
Pay no less than minimum wage on an hourly rate basis.
You are not required to provide employee health insurance, however there are financial and retention advantages to contributing some or all of your employee’s health insurance premium. HWS is happy to discuss this with you.
MICHIGAN LABOR LAWS
Michigan defers to the FLSA, which requires that all domestics, excluding companions, be paid at no less than the greater of the state or federal minimum wage.
Michigan minimum wage is $9.65/hr, but only applies if you have 2 or more employees. If you have only one employee, federal minimum wage rate applies, and minimum wage is $7.25/hr.
All live-out workers are to be paid an overtime differential of 1.5 times the hourly wage for hours over 40 in a work week. Live-in domestics, again excluding companions, must be paid their hourly wage for all hours worked, without an overtime differential. Overtime or premium pay is not required for hours worked in excess of 8 per day or on weekends or holidays.
Paid Time Off
Michigan does not mandate any paid time off for non-exempt workers.
If you do not specify in your employment policies or work agreement with your employee, you are required to pay accrued vacation leave upon separation from employment.
The federal government establishes and updates a maximum rate for non-taxable mileage reimbursement each year. The current rate is $0.56 per mile.
Michigan allows you to pay your household worker daily, weekly, bi-weekly, semi-monthly, or monthly. HomeWork Solutions recommends paying your employee(s) weekly or bi-weekly. Pay upon separation is due on the next scheduled pay date.
Each time you pay an employee, you must give them a statement that has their hours worked, gross wages paid, identification of the pay period for which payment is being made, and a separate itemization of deductions.
Employment Contract Requirements
Michigan does not require a written employment contract. However, a free sample work agreement can be found here.
Workers’ Compensation Insurance
Michigan requires household employers to obtain Workers’ Compensation. HWS ALWAYS recommends obtaining a Workers Compensation Insurance policy for the protection it provides in the event of a work-related injury sustained by your employee. A policy can usually be obtained easily and cost effectively by contacting your Homeowner’s or Renter’s Insurance provider. HWS can help you obtain this insurance through our insurance partner (just give us a call).
State Unemployment Insurance
Michigan requires a new employer state unemployment insurance tax of 2.7% for the first $9,500 wages paid to each employee. This may vary if you have previous employees.
Frequency of Tax Filings
Michigan requires quarterly tax filing for unemployment insurance taxes and income tax withholdings.
HWS WILL HELP YOU DO THE RIGHT THING
HWS knows that most families want to pay their household employees legally and insure that the employee receives workers compensation and unemployment insurance protections. You also want to establish a principled relationship with your employee who is caring for and interacting with precious family members. Getting the relationship started on the right footing, including complying with legal and tax formalities, helps set the tone for the relationship.