New York Tax & Labor Law Summary
Basics and Requirements
Finding helpful New York nanny tax information is not always easy. That's why we've distilled all the relevant state and federal tax and labor law into this overview. If your eyes begin to glaze over, don't worry. Our service is set up to handle everything for you with guaranteed accuracy and timeliness.
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.
Household employers have four primary tax responsibilities. These are sometimes referred to as the New York nanny tax obligations:
1. Withhold Social Security and Medicare from their employees paycheck each pay period. Federal income tax, state income tax and New York City income tax (if applicable) should be withheld based on the employees selections on Form W-4 and Form IT-2104.
*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 employers portion of Social Security and Medicare, as well as federal and New York unemployment insurance taxes (FUTA and SUTA) and the New York Re-employment Service Fund 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 and your tax breaks as well as your employees take-home pay give us a call.
Note: In addition to the tax breaks described above, household employers in New York may be entitled to additional state tax credits for childcare-related expenses. Please call for details.
3. File tax forms with the New York Department of Labor, 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. If the state income tax withholdings exceed $700 during a calendar quarter, the New York Department of Taxation and Finance requires employers to deposit the state withholdings within 5 business days of crossing the $700 maximum withholding threshold.
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. The state of New York, as well as city governments, may supplement the federal law with additional state and municipal labor law.
The current New York minimum wage rate: $11.10 per hour.
New York City minimum wage rate: $13.50 per hour.
Nassau, Suffolk & Westchester County minimum wage rate: $12.00 per hour.
Note: Whenever more than one rate applies, employers are required to pay the higher rate.
Additionally, New York employers who pay their employee minimum wage must pay an additional hour of wages if either of the following occur:
- The employee works more than 10 hours in a day
- The employee's hours are split at any point during the day - i.e. 8-10am followed by 1-5pm
Household employers in New York are required to pay their employees on a weekly basis.
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. Household employees in New York have some additional overtime protections. Combining both federal and state laws, the requirements for New York household employers are as follows:
- The standard workweek is defined as 40 hours in a 7-day period.
- New York labor law does not allow non-exempt workers to be paid a fixed salary.
- New York household employees who live outside their employers home (live-out employees) are due overtime compensation for hours worked over 40 in a workweek.
- New York household employees who live at their employers home (live-in employees) are due overtime compensation for or all hours worked over 44 in a workweek.
- The overtime rate of compensation is 1.5 times the regular hourly rate (time-and-a-half).
- New York household employees must be granted one day (24 hours) of rest per week. If an employee agrees to work on the 7th day, all hours worked that day must be paid at the overtime rate.
New York law requires employers to provide employees with a paystub each payday that includes the following information:
- Employees name
- Employers name, address and phone number
- Dates covered by the payment
- Hours worked, including overtime hours when applicable
- Rate(s) of pay, including overtime rate when applicable
- Employees gross and net wages
- Itemized deductions
- Itemized allowances and credits claimed by the employer, if any
New York employers are required to provide all household employees with a written notice at the time of hire and when there is a change in pay rate or payday. The notice should include the following information:
- The employees rate(s) of pay, including overtime rate of pay (if applicable)
- Any allowances the employer intends to claim as part of the minimum wage (tip, meal, lodging allowances, etc.)
- Payroll frequency and regular pay day
- The employers name, address, and telephone number
The law also requires employers to receive written acknowledgement of receipt of the wage notice from employees, which must be kept on file by the employer for six years. Typically, this requirement is met by having the employee sign and date the wage notice for the employers records. If the employer provides the notice via email, an email from the employee indicating that he/she has received the notice constitutes sufficient written acknowledgement.
The New York Department of Labors website provides template notices, but employers may also develop their own notices. Notices must be provided in English. If English is not an employees primary language, employers must also provide the employee with a notice in the workers primary language if the Department of Labor provides notice templates in that language.
New York employers are required to notify employees in writing before reducing the employees wage rate or changing any other details on the wage notice. If an employees pay rate increases before January (when the next wage notice is due), an update to the employees paystub is sufficient and the employer need not provide a new wage rate notice until the February 1 deadline.
New York employers are required to keep up-to-date weekly payroll records of hours worked by employees and wages paid. These records must be kept on file for six years.
Paid Time Off
New York household employees must be offered a written notice about policies on sick leave, vacation, personal leave and holidays. After a year of employment, New York household employees must be provided paid days off. 1 day for employees working 19 or fewer hours per week, 2 days for those working 20-29 hours per week, and 3 days for employees working 30 or more hours per week.
Paid Family Leave
Household employees in New York working 40 hours or more per week are eligible for Paid Family Leave to help them bond with a child, care for a close relative with a serious health condition, or help relieve family pressure due to active military service. Employees can receive benefits of up to 50% of their weekly wage for up to 8 weeks. Paid Family Leave is funded through a small payroll tax withheld from the employee each pay period.
New York City Sick Time
The New York City Earned Sick Time Act requires employers to provide domestic workers with 2 days of paid sick leave per calendar year, provided that the worker has been employed for one full year. This is in addition to the other 3 paid days off required by the Domestic Workers' Bill of Rights. All household employers should be aware of the important components of the law:
- Employers can choose whether unused sick time carries over to the next year and can limit sick time usage to 40 hours per year.
- Unused sick time does not need to be paid out at the time of termination.
- Employees must be provided access to a document that shows their accrued sick time each pay period.
Household employers in New York are required to provide a Termination Notice to their employee if they are fired or laid off. Written notice must be given no later than 5 working days after the termination.
The current federal mileage reimbursement rate is 58 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 commuter mileage, it is considered taxable compensation.
Workers Compensation Insurance: Household employers in New York are required to carry a workers compensation insurance policy if their employee works 40 or more hours per week or is a live-in employee. Its 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 its 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.
Disability Insurance: Household employers in New York are required to carry a disability insurance policy for all full-time or live-in employees. The employer can deduct up to 60 cents per week to help defray the cost of the policy. The State Disability Insurance Program (SDI) provides Disability Insurance (DI) benefits to workers who cannot work for non-work-related reasons (i.e. maternity leave, accident, illness).
Unemployment Insurance: New York 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 New York Department of Labor 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 Labor may trigger a future unemployment tax rate increase for the employer.
Health Insurance: Household employers in New York are NOT required to pay for their employees health insurance. However, there is a tax incentive to do so. Families with only 1 employee can make contributions toward their employees 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 purchase a policy through SHOP (Small Business Health Options Program) to gain this benefit.
Families can direct their employees to www.care.com/benefits where they can search for health insurance policies and purchase coverage for themselves.
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.