Many families wrongly assume that temporary employment of a domestic worker has a special legal classification or somehow absolves them of their legal obligations as an employer. In the eyes of the law, it doesn’t matter if the worker is temporary or permanent, full-time or part-time, salary or hourly – in all cases, the worker is considered the employee of the family for whom he or she works and all employer laws and responsibilities apply.

There are two possible exceptions and they both fall in the area of payroll taxes:

1. The Social Security & Medicare taxes (collectively known as “FICA”) are waived for both the employer (7.65%) and the employee (7.65%) if the employee earns less than $1,700 (2011) in a calendar year. This is sometimes referred to as “the Casual Babysitting Exemption.”

   Once the threshold is crossed, FICA tax obligations become effective on the first dollar of wages. For that reason, unless a family is certain wages will remain below the threshold, we advise withholding the employee’s FICA taxes from each paycheck. If the threshold is crossed, the proper tax dollars are already collected for remittance to the IRS. If the threshold is not crossed, the withheld tax dollars are simply returned to the employee.

2. The Unemployment taxes required of employers are generally waived if the sum of the employer’s wages to ALL employees is less than $1,000 in a calendar quarter (the federal unemployment tax threshold is $1,000 in a calendar quarter; some states impose thresholds as low as $500 in a calendar quarter) and if the employer has not employed any other workers who reached the unemployment tax threshold over the previous 6 calendar quarters.

3. Unless both of these unemployment conditions are met, employers of a temporary worker(s) are responsible for unemployment tax obligations at the state and federal levels.

Aside from these two possible tax exemptions, families should handle their temporary employment obligations as they would for any other employee.