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Pennsylvania Fact Sheet Household Tax Compliance Tips


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 $2,700 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.

Unemployment Taxes

You will make contributions to the IRS and Pennsylvania to fund unemployment and worker re-training programs.

Income Taxes

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.

Health Insurance

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.

PENNSYLVANIA LABOR LAWS

Minimum Wage

Pennsylvania 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.

Pennsylvania minimum wage is $7.25/hr.

Overtime Pay

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

Pennsylvania does not mandate any paid time off for non-exempt workers.

  • Philadelphia
    • Under Philadelphia‘s Domestic Worker Bill of Rights, you must provide paid time off to your employees. Paid time off accrues at 1 hour per 40 hours of work and is capped at 40 hours earned in a calendar year. Live-in workers shall accrue time only for on-duty time. Paid leave time is calculated and accrued in the same manner as the regular rate of pay for your employee’s services.
    • Employees in Philadelphia are allowed to take an uninterrupted, paid 10-minute rest period for every four consecutive hours they work, and an uninterrupted 30-minute meal break after more than five consecutive hours worked. If the nature of their job makes the breaks not possible, then they must continue to be paid while they eat.
  • In Pittsburgh, you are required to provide up to 24 hours of paid sick time each calendar year. Sick time accrues at 1 hour per 35 hours worked. You may frontload 24 hours of sick time at the beginning of the year, instead of this accrual system. You are required to carryover up to 24 hours of unused sick time to next year unless you frontload your sick time.

 

Unpaid Time Off

Pennsylvania does not mandate any unpaid time off for non-exempt workers.

  • In Philadelphia, live-in employees get a 24-hour rest period after working for 6 consecutive days. This time off can be unpaid, but employees may come and go as they please and have no work responsibilities.

 

Payroll Frequency

Pennsylvania allows you to pay your household worker daily, weekly, bi-weekly, or semi-monthly, but does not allow monthly pay cycles.  Pay upon separation is due on the next scheduled pay date.

Payroll Documentation

Each time you pay an employee, you must give them a statement listing wages, hours worked, rates paid, gross wages, allowances claimed as part of the minimum wage (if any), deductions and net wages.

At the time of hire and before any change to the following information, you must notify your employees of the time and place of payment, the rate of pay, and the amount of any fringe benefits.

Employment Contract Requirements

Pennsylvania does not have employment contract requirements. However, a free sample work agreement can be found here.

  • Philadelphia’s Domestic Workers Bill of Rights requires you to make a written contract with each of your employees. The agreement must be in English, but if the employee prefers it, the contract can be in their preferred language. You both must sign and date the contract after having ample time to review it. The contract must include:
    • a specific list of job duties;
    • hourly wage and overtime wage;
    • weekly schedule including number of hours per week;
    • the manner and frequency of payment;
    • breaks for rest and meals;
    • paid or unpaid leave including sick time; paid holidays; any other benefits provided;
    • required and/or provided modes of transportation;
    • value of housing if provided; sleeping period and personal time for live-in workers;
    • the term of the contract;
    • and any other terms and conditions that you both agree on, provided those provisions do not waive your employee’s rights under federal, state, or local law.

 

Workers’ Compensation Insurance

Pennsylvania does not require household employers to obtain Workers’ Compensation Insurance. However, 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

Pennsylvania requires a new employer state unemployment insurance tax of 3.822% for the first $10,000 wages paid to each employee. This may vary if you have previous employees.

Frequency of Tax Filings

Pennsylvania requires quarterly tax filing for unemployment insurance taxes and either you or your employee must do semi-weekly, semi-monthly, monthly, or quarterly tax filing for income tax withholding depending on your past amount of withholding in a quarter.

Domestic Worker Bill of Rights (DWBR)

Philadelphia has a Domestic Worker Bill of Rights (DWBR) which includes requirements for written employment contracts, breaks, paid and unpaid leave, and other protections for your employees.

HWS WILL HELP YOU DO THE RIGHT THING

 

HWS knows that most families want to pay their household employees legally and ensure 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.

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