Washington D.C. Tax & Labor Summary

Nanny tax and payroll requirements for Washington DC families

Updated

Families in the nation's capital have a specific set of tax and labor laws to follow when they hire a household employee. That's why we've created this Washington, DC nanny tax overview to help answer all the questions you may have. And if you decide you need help handling these responsibilities, our comprehensive service can take the work and worry off your plate.

 

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.

 

WASHINGTON, DC HOUSEHOLD EMPLOYMENT TAX RESPONSIBILITIES

Household employers have four primary tax responsibilities. These are sometimes referred to as the Washington, D.C. nanny tax obligations:

 

1. Withhold Social Security and Medicare taxes from their employee's paycheck each pay period.  Federal and state income taxes should be withheld based on the employee's selections on Form W-4 and Form D-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 Washington, D.C. unemployment insurance taxes (FUTA and SUTA). D.C. household employers are also required to pay a small Administrative Funding tax and a Paid Family Leave tax.

Good news! There are some tax breaks for dependent care that can help offset these employer taxes. For an estimate of your employer costs, your tax breaks and your employee's take-home pay, give us a call. In addition to the tax breaks just mentioned, household employers in Washington, D.C. may be entitled to additional state tax credits for childcare-related expenses. Please call for details.

 

3. File tax forms with the District of Columbia Office of Tax & Revenue (DOTR) and the District of Columbia Department of Employment Services (DOES), 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/Form W-3 with the Social Security Administration and file a Schedule H with your personal income tax return.

 

WASHINGTON, DC 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. The District of Columbia may supplement federal law with additional municipal labor laws.

 

Minimum Wage

Minimum wage in Washington, D.C. is currently $14.00 per hour.

Note: Household employers that require their employees to work at least 4 hours per day must pay them for at least 4 hours of work - even if the employee is sent home early. Hours paid while the employee is not on duty only have to be paid at minimum wage, however, the family can choose to pay the employee's normal hourly rate. For example, if an employee normally works 6 hours, but is sent home after 3 hours of work, the family must pay their employee for 1 more hour at mimimum wage.

 

Washington, DC Overtime Requirements

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 performed. The FLSA requires domestic workers be protected by overtime laws. The requirements for Washington, D.C. household employers are as follows:

  1. The standard workweek is defined as 40 hours in a 7-day period.
  2. Washington, D.C. 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.

 

Paid Sick Time

The District of Columbia requires all employers to track and accrue sick time for their employees. Household employers are required to accrue sick time for their employees at a rate of 1 hour for every 87 hours worked. Sick time is capped at 24 hours so employers do not have to continue accruing it as long as the employee has 24 hours of sick time to use. Employees can begin using their accrued sick time after 90 days of employment. Unused sick time accrued during the year must be carried over to the next year, but unused sick time does not need to be paid upon termination. 

 

Paid Family Leave

Beginning on July 1, 2020, household employers in Washington, D.C. will be required to allow their employees to take paid family leave. The amount of paid leave is dependent on the life event experienced by the employee:

  • Up to 2 weeks paid leave if the employee has a serious personal health condition.
  • Up to 6 weeks paid leave to take care of a family member with a serious health condition.
  • Up to 8 weeks paid leave following the birth or adoption of a child.

 

Paid family leave benefits are funded through a small tax paid by employers on a quarterly basis. Employees using paid family leave benefits are paid by the District of Columbia Department of Employment Services.

 

Wage Notice Requirement

Household employers in Washington, D.C. are required to provide their employees with a written wage notice at the time of hire and if there are any changes to the employee's wages or the employer's information. The notice should include the following information:

  1. The employee's rate(s) of pay, including overtime rate of pay (if applicable).
  2. Payroll frequency and regular payday.
  3. The employer's name, address and telephone number.

 

Mileage Reimbursement

Washington, D.C. employers must reimburse employees if they are required to drive their own vehicle on the job. The current federal mileage reimbursement rate is 58 cents per mile and covers the cost of gasoline as well as general wear and tear on the car. 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 commuter mileage, it is considered taxable compensation.

 

INSURANCE FOR WASHINGTON, DC HOUSEHOLD EMPLOYERS

 

Workers' Compensation Insurance 

Household employers in Washington, D.C. are required to carry a workers' compensation insurance policy if their employee works 240 hours or more per quarter. It's very important insurance, which 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. Whether it's required in your situation or not, we recommend obtaining coverage. As part of the HomePay setup process, we can guide you to a convenient, affordable solution.

 

Unemployment Insurance 

Washington, D.C. 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 District of Columbia Department of Employment Services (DOES) 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 DOES may trigger a future tax rate increase for the employer. 

 

Health Insurance

Household employers in Washington, D.C. are NOT required to pay for their employee's health insurance. However, there is a tax incentive to do so. Families with only 1 employee can make contributions toward their employee's health insurance premiums and treat the amount as non-taxable compensation. In this scenario, neither the employee nor the employer are required to pay any taxes on that portion of the compensation.

Note: Employers with 2 or more employees must set up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or purchase a policy through SHOP (Small Business Health Options Program) to gain this benefit. Visit our health insurance page for more information about these options. 

 

 

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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