San Antonio Express-News
March 23, 2004

Social Security for
Household Employee

copyright 2004, Paul Premack

The situation with your maid desiring to retire and receive social security benefits, even though no contributions have been made to the system while she was working, can be a very bad scenario. She cannot rely on the record of her daughter, but if she was married she may be able to rely on her husband’s record to qualify for social security.

If that fails then the issue is whether she was a "household employee" or was an "independent contractor." IRS says you have a household employee if you "hired someone to do household work and if you can control not only what work is done, but how it is done. It does not matter whether the work is full time or part time. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis or by the job."

On the other hand, if only the worker can control how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business. If your maid provided services to others as well as to you, and she provided her own tools and supplies, then she was self employed. Then qualifying for social security is her problem, not yours.

If she was your employee, it is your problem despite your maid’s complicity. Though there is no requirement that you withhold federal income tax for a household employee, you had a legal obligation to pay social security and Medicare taxes if her annual salary exceeded $1,400. You should have withheld 7.65% (6.2% for social security and 1.45% for Medicare) from each payment of wages. You’d match that with another 7.65% to cover your share.

For example, if her wage is $400 per month, you withhold $30.60 and match that with another $30.60 for total tax of $61.20. Your cost is $430.60 per month; her take-home is $369.40. Taxes are reported by filing W2 and W3 forms each year, and by including a Schedule H with your form 1040 each year.

To add another layer: if you pay wages $1,000+ in a calendar quarter, you also owe federal unemployment taxes (FUTA). The rate varies from 6.5% to 0.8% on the first $7,000 paid to each employee annually. You must fill out another tax report annually and must pay state unemployment tax (collected by the Texas Workforce Commission).

Your maid needs and should have a social security check. From her perspective, there is much to gain by applying for benefits and listing you as her long-time employer. That's when you’ll hear from the Social Security Administration and the IRS. You should meet with your CPA to file overdue returns -- the CPA will advise on how far back to reach -- and to pay the taxes that were due. Then you'll have complied with the law, and your maid might qualify for social security benefits.