Resource Center
What can we help you find?

2024 Alabama household employment tax and labor law guide

Familiarize yourself with the current household employment requirements for families hiring a caregiver in Alabama.

2024 Alabama household employment tax and labor law guide

Finding helpful Alabama nanny tax information is not always easy. That’s why we’ve combined all the state and federal tax and labor law information you’ll need! Check out the information below that HomePay is here to help with.

Checklist for Alabama household employers

We know you’re busy! Here’s a quick “to-do” list with links to extra details below.

Beginning of employment 

During employment 

Optional benefits for your employee

Ending employment

Beginning of employment 

Verify caregiver’s work eligibility

Before your employee begins to work, you need to fill out Form I-9 to verify they’re eligible to work in the U.S. The I-9 does not get sent to any government agency but must be presented to authorities if your nanny or senior caregiver’s employment eligibility is ever questioned. Your state also requires that you complete the E-Verify process for your employee.

Set up EIN & state tax account(s)

You must first apply for a EIN (Employee Identification Number) with the IRS. This will be used as your unique ID with both state and federal tax authorities. Then you can open an account with your state taxing authority.

Workers’ compensation

Household employers in Alabama are not required to get coverage for workers’ compensation insurance, but we recommend to do so. These policies pay for medical expenses and lost wages if an employee has a work-related injury or illness. Obtain an instant quote and purchase a policy online, or contact our partner, Clarke White, at 804-267-1210 or wcnanny@allrisks.com.

Employment posters 

Families in Alabama are required to notify their employee(s) of their rights by sharing these posters

During employment 

File returns, remit taxes and manage correspondence

  • File state employment tax returns throughout the year and remit state employer and employee taxes.
  • Remit federal employer and employee taxes via 1040-ES estimated tax payment voucher four times each year.
  • Each year end, prepare Schedule H and file with Form 1040; prepare and distribute Form W-2 to each employee; file Form W-2 Copy A/Form W-3 with the Social Security Administration (SSA).
  • Manage ongoing alerts and notices from the state (tax rates and labor law is subject to change at any time).

Minimum wage rates

The minimum wage in Alabama is currently $7.25/hour.

Alabama overtime requirements

  • Live-out employees must be paid 1.5x their hourly rate for all hours worked over 40 in a workweek.
  • Live-in employees are not required to be paid overtime. 
  • Overtime is not required to be paid when work is performed on a holiday. 

Optional benefits for your employee 

Health insurance

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.

Families with 2 or more employees have 3 options:

  1. Set up an Individual Coverage Health Reimbursement Arrangement (ICHRA).
  2. Set up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
  3. Purchase a policy through SHOP (Small Business Health Options Program). 

Visit our health insurance page for more information about these options.  

Mileage reimbursements

The current federal mileage reimbursement rate is 67 cents per mile and only covers miles driven by your employee while on the job. Miles driven commuting are not eligible for reimbursement.

Ending employment 

Termination notice 

Household employers in Alabama are required to provide a termination notice to their employee when they end their employment relationship.

Managing unused PTO 

Alabama household employers do not need to pay their employees for unused sick and/or vacation time.

Close down your state employment tax account(s)

The state tax agencies expect you to file timely returns for as long as your tax accounts are open — even to report $0 in wages paid.

Maintain payroll records

Household employers are required to keep wage records on file for at least three years.

The information contained in this article is general in nature, may not be applicable to your specific circumstances, and is not intended to be a substitute for or relied upon as personalized tax or legal advice.

Get started with HomePay!

Already enrolled with HomePay? Log in