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Social Security Benefits for Household Workers

Whether it’s California, New York, Texas, or any other state, it is very common for wealthy individuals to employ others to help them with cooking, cleaning, babysitting, and running the family’s household. It’s also common for individuals and families to avoid paying taxes when they employ household workers, however, under certain circumstances they are by law, supposed to deduct Social Security and Medicare taxes from the worker’s wages.

Are you paid to clean, cook, take care of the yard, babysit, or conduct other household responsibilities for an individual or family? If your answer is “yes” and you will be paid at least $2,200 in 2020, including money spent on your meals, transportation, and housing, your employer has additional financial responsibilities.

Social Security & Medicare Taxes

By law, whenever someone employs a household worker and they spend more than $2,500 on their wages and other expenses mentioned above, they are required to deduct Social Security and Medicare taxes from the person’s wages and they’re supposed to: 1) pay those taxes to the Internal Revenue Service (IRS), and 2) report the worker’s wages to Social Security.

You see, for every $2,200 in wages that you earn, you earn credits toward Medicare coverage and Social Security benefits. Generally, people must have 10 years of work experience under their belts to qualify for Social Security retirement benefits (which they can get as early as age 62), Social Security Disability benefits (SSDI) for the worker and their dependents, survivors benefits for their family, and Medicare benefits.

In some circumstances, special rules apply. If you happen to run a hotel, boarding house, or rooming house, all of your wages will have to be reported. If you are a babysitter who is under the age of 18 and household employment is not your primary occupation, your employer will not need to pay Social Security taxes on your behalf.

“Household work is credited somewhat differently from other work. Generally, a person earns one credit for each $1,410.00 of reported earnings (in 2020), up to a maximum of four credits for the year. However, a household worker will earn Social Security credit only for earnings of at least $2,200 from each employer,” according to the Social Security Administration (SSA).

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