Finding helpful Maryland 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 Maryland household employers
We know you’re busy! Here’s a quick “to-do” list with links to extra details below.
Beginning of employment
- Verify caregiver’s work eligibility.
- Set up EIN & state tax account(s).
- Obtain a required workers’ compensation insurance policy.
- Provide a wage notice.
- Provide an employment contract (Montgomery County only).
- Display employment posters.
During employment
- File returns, remit taxes and manage correspondence.
- Pay at least Maryland minimum wage.
- Pay overtime, when it applies.
- Provide Montgomery County sick leave.
Optional benefits for your employee
Ending employment
- Provide a termination notice.
- Manage unused paid time off.
- Close down your state employment tax account(s).
- Maintain payroll records.
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.
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 Maryland are required to carry a workers’ compensation insurance policy if their employee earns more than $1,000 in a calendar quarter. 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.
Wage notice requirement
Maryland household employers are required to provide their employees with a written wage notice at the time of hire. The notice must include the employee’s hourly pay rate, regular pay days and leave benefits (sick time, vacation time, etc.).
Montgomery County employment contract requirement
Under the Domestic Workers Law, household employers in Montgomery County must negotiate a written contract with an employee who works 20 or more hours per week for a period of 30 or more days.
Employment posters
Families in Maryland are required to notify their employee 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
- Maryland state: $15.00/hour
- Howard County: $14.00/hour
- Montgomery County: $14.50/hour
Note: Whenever more than one rate applies, employers are required to pay the higher rate.
Maryland 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 required to be paid overtime.
- Overtime is not required to be paid when work is performed on a holiday.
Montgomery County sick leave
Household employers in Montgomery County are required to provide up to 56 hours of sick leave to their employee each calendar year. 32 hours must be paid sick leave and the remaining 24 hours may be unpaid. HomePay keeps track of sick time accruals on your account.
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:
- Set up an Individual Coverage Health Reimbursement Arrangement (ICHRA).
- Set up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
- 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 requirement
Household employers in Maryland are required to provide notice to their employee notifying them of their potential right to unemployment benefits when they let them go from their job.
Managing unused PTO
Maryland household employers do not need to pay their employees for unused sick time, but are required to pay out any unused vacation time unless their employment contract states otherwise.
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.