Florida Tax & Labor Law Summary

Updated

Household employers are subject to unique laws, exceptions and exemptions. To clear up any confusion you might have, we've created this overview to encompass everything Florida families need to know about nanny taxes in the Sunshine State. Or, if you would like us to do all this for you, we'd be happy to help.

WORKER CLASSIFICATION

When a family hires someone to perform duties in or around their home, they are considered a “household employer.” The IRS views the worker — whether a nanny, health aide, housekeeper, senior caregiver, gardener, chef, personal assistant, estate manager, etc. — as an employee of the family in nearly every case. Misclassifying an employee as an “independent contractor” (using Form 1099) is considered tax evasion, so please call us if you're not sure how to classify your worker.

TAX RESPONSIBILITIES

Household employers have four primary tax responsibilities.  These are sometimes referred to as the Florida “nanny tax” obligations:

1. Withhold Social Security and Medicare taxes from their employee’s paycheck each pay period.  Federal income taxes should be withheld based on the employee’s selections on Form W-4.

*It is not legally required that income taxes be withheld.  However, we strongly advise it so that the employee does not have a large tax burden at the end of the year and is not subjected to underpayment penalties.

2. Pay the employer’s portion of Social Security and Medicare, as well as federal and Florida unemployment insurance taxes (FUTA and SUTA).

Good news!  There are some tax breaks for dependent care that can help offset these employer taxes.   For an estimate of your employer costs and your tax breaks – as well as your employee’s take-home pay – give us a call.

3. File tax forms with the Florida Department of Revenue, typically on a quarterly basis, and with the IRS in April, June, September and January. With these filings, employers remit (pay) the employee taxes withheld and the employer taxes accrued.  

4. At the end of the year, prepare Form W-2 and distribute to each employee, file Form W-2 Copy A and Form W-3 with the Social Security Administration and file Schedule H with your personal income tax return.

LABOR LAW REQUIREMENTS

The Fair Labor Standards Act (FLSA) provides the framework for federal and state wage and hour law.  Household employees are classified under the FLSA as non-exempt workers.  Non-exempt workers in all 50 states are covered by the rules and protections of the FLSA.  Florida may supplement the federal law with additional requirements.

Minimum Wage

Minimum wage in Florida is currently $8.10 per hour.

Overtime

Overtime requirements are not determined by the amount of hours or by the type of pay (hourly or salary); they are determined by the type of work. The FLSA requires domestic workers be protected by overtime laws. The requirements for Florida household employers are as follows:

  1. The standard workweek is defined as 40 hours in a 7-day period.
  2. Florida employees should be paid at least 1.5 times the regular hourly rate (time-and-a-half) for all hours worked over 40 in a workweek. 
  3. Overtime compensation is not required for live-in employees.
  4. Overtime is not required to be paid when work is performed on a holiday.

Mileage Reimbursement

The current federal mileage reimbursement rate is 54 cents per mile.  This rate, which covers the cost of gasoline as well as general wear and tear on the car, should be used to calculate reimbursement payments to an employee who drives her own vehicle while “on the job.”  Mileage reimbursement is not considered taxable compensation, so neither the employee nor the employer is required to pay any taxes on that portion of the compensation.

Note: Miles driven while commuting to and from the jobsite are not considered “on the job.”  If the employer reimburses the employee for commute mileage, it is considered taxable compensation.

INSURANCE

Workers’ Compensation Insurance:  Household employers in Florida are not required to carry a workers’ compensation insurance policy. However, we recommend obtaining coverage because it assists with medical expenses and lost wages if an employee has a work-related injury or illness. It also provides protection to the employer since workers who accept benefits generally forfeit their right to sue the employer – regardless of fault. As part of the HomePay setup process, we can guide you to a simple stand-alone policy through our licensed insurance partner. It's a convenient, affordable solution for our clients. With free instant quotes, a streamlined application process and expert claim support, it's a convenient, affordable solution for families.

Unemployment Insurance:  Florida unemployment insurance is a state-managed program that provides financial assistance to help laid-off workers make ends meet until they can find another job. This “insurance” is funded through taxes that employers are required to pay on wages paid to employees.  These taxes flow into a general fund and unemployment benefits are distributed from the fund to employees who are “let go” from their job due to no fault of their own.  The Florida Department of Revenue determines whether or not an applicant qualifies for benefits after reviewing their online or paper application and/or by conducting a telephone interview.  Benefits paid to a former employee by the Department of Revenue may trigger a future tax rate increase for the employer.

Health Insurance: Household employers in Florida are NOT required to pay for their employee’s health insurance.  However, there are some tax incentives to do so. First, employers who pay for at least 50% of their employee’s health insurance premiums can capitalize on the Health Insurance Tax Credit for Small Employers (HITC). This tax break provides a credit of up to 50% of the employer’s contributions – as long as the average annual wage for all employees is less than $50,000 and the policy is purchased through SHOP (Small Business Health Options Program).

Second, a household employer's contributions toward health insurance premiums are not considered taxable income if the policy is purchased through SHOP. In this scenario, neither the employee nor the employer are required to pay any taxes on that portion of the compensation.

Note: Employers with only 1 employee do not have to purchase a policy through SHOP to gain this benefit, but employers with multiple employees must do so.

The bottom line: Health insurance is a tax-advantaged form of compensation that can create significant tax savings for both employer and employee.

Employers in Florida that do not wish to set up health insurance for their employee through SHOP can direct them to www.care.com/benefits where they can purchase a policy on their own.

 

 

 

The information herein is general in nature and may not be applicable to or suitable for your specific circumstances. Accordingly, the information is not intended to be providing legal or tax advice, and should not be relied upon without the advice and guidance of a professional tax or legal advisor.

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