Washington Tax and Labor Law Summary
Household employment requirements for families hiring a caregiver in Washington
Families with questions about Washington nanny taxes need to look no further than this overview for all their household employment answers. And those that don't feel comfortable keeping up with the tax and labor law requirements themselves can utilize our comprehensive service to take the work and worry off their plate.
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 HOUSEHOLD EMPLOYMENT TAX RESPONSIBILITIES
Household employers have four primary tax responsibilities. These are sometimes referred to as the Washington nanny tax obligations:
1. Withhold Social Security and Medicare taxes, as well as Paid Family & Medical Leave taxes from their employee's paycheck each pay period. Federal income taxes should be withheld based on the employees 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 employers portion of Social Security and Medicare, as well as federal and Washington unemployment insurance taxes (FUTA and SUTA) and a small employment administration 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 employee's take-home pay - give us a call.
3. File tax forms with the Washington Employment Security Department (ESD), 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 a Schedule H with your personal income tax return.
WASHINGTON 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 with few exceptions. The state of Washington may supplement federal law with additional state and municipal labor laws.
Minimum wage in Washington is currently $13.50 per hour.
Seattle minimum wage rate: $15.75 per hour
Note: Whenever more than one rate applies, employers are required to pay the higher rate.
Paid Sick Time
Household employers in Washington are required to provide paid sick time to their employees. Sick time can either accrue at the rate of 1 hour for every 40 hours worked or be offered in full at the beginning of the year. Employers choosing the latter option must calculate how much sick time their employee would accrue for the year and offer this amount. Unused sick time may carry over to the next year, but employers may cap it to 40 hours. Any unused sick time does not need to be paid out upon termination.
Paid Family & Medical Leave
Household employees in Washington are eligible for 12 weeks of paid leave per year beginning in 2020. This is a state-run insurance program funded by payroll taxes withheld from the employee. Employees can use their leave to:
- Care and bond after the birth of a child or the placement of a child under the age of 18.
- Care for a family member that is ill or injured.
- Recover after an illness or injury.
- Help relieve family pressure due to active military service.
Employees are eligible to receive benefits if they have worked 820 hours or more during the previous 4 quarters prior to making a claim for benefits. For example, a claim made in March would be eligible if the employee worked at least 820 hours the previous calendar year. Benefits are based on how much the employee makes on a weekly basis. Employers are required to provide this notice to their employee explaining Paid Family & Medical Leave benefits.
Washington 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 household employers are as follows:
- The standard workweek is defined as 40 hours in a 7-day period.
- Washington 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.
- Overtime compensation is not required for live-in employees.
- Overtime is not required to be paid when work is performed on a holiday.
Seattle Domestic Worker Bill of Rights
Household employers in Seattle must provides several additional benefits in addition to what the state of Washington requires:
- Provide a 30-minute uninterrupted meal period when their employee works more than 5 consecutive hours.
- Provide employees with a paid 10-minute uninterrupted rest break for each 4 consecutive hours of work.
- If the employee is unable to take uninterrupted breaks, they must be paid for the missed break(s). Families also need to pay their employee an additional 30 minutes and/or 10 minutes for each break they were not able to take.
- Families with a live-in employee must allow them to have an unpaid 24-hour period after 6 consecutive days of work.
Employment Poster Requirements
Families are required to notify their employee of their rights. Share these posters in a location that your employee can easily access.
The current federal mileage reimbursement rate is 57.5 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.
INSURANCE FOR WASHINGTON HOUSEHOLD EMPLOYERS
Workers' Compensation Insurance
Household employers in Washington are required to carry a workers' compensation insurance policy if two or more employees each work 40 or more hours per week. 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. To acquire a workers' compensation policy, please contact the Washington State Department of Labor & Industries at (800) 547-8367.
Washington 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 Washington Employment Security Department (ESD) 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 ESD may trigger a future tax rate increase for the employer.
Household employers in Washington 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 an Individual Coverage Health Reimbursement Arrangement (ICHRA), 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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