What forms do I need to file to correctly pay a household employee, like a nanny, in California?

To correctly pay a household employee in California, you must register as an employer, obtain required insurance, and file specific forms with federal and state agencies. This process ensures you comply with tax, labor, and unemployment insurance laws. Here is a step-by-step guide to the required forms and actions: Step 1: Obtain Employer Identification Numbers You need two numbers to act as an employer. First, apply for a free federal Employer Identification Number (EIN) from the IRS online. Second, register with California's Employment Development Department (EDD) for a state Employer Account Number (EAN) by filing Form DE 1 HW, Registration Form for Employers of Household Workers. You must register within 15 days of paying over $750 in wages in a calendar quarter. Step 2: Collect Employee Paperwork On or before their first day, have your employee complete three key forms: the federal Form I-9 (Employment Eligibility Verification), the federal Form W-4 (to determine federal income tax withholding), and the California Form DE 4 (to determine state income tax withholding). You must keep these forms for your records. Step 3: Report Your New Employee to the State You must report your new hire to the EDD within 20 days of their start date. You can file this report online through the EDD's website or by mailing in Form DE 34, Report of New Employee(s). Step 4: Secure Workers' Compensation Insurance Before your employee begins work, you must purchase a workers' compensation insurance policy. California law requires this coverage for all employers, even those with only one part-time household employee. Contact a licensed insurance broker to obtain a policy. Step 5: File Tax and Wage Reports Each year, you will file Schedule H (Household Employment Taxes) with your personal federal income tax return (Form 1040). You must also provide your employee with a Form W-2 by January 31st and file it with the Social Security Administration. For state purposes, you will file quarterly reports with the EDD using Forms DE 9 and DE 9C to report wages and pay state unemployment and disability insurance taxes. Important details and nuances: You are required to provide your employee with an itemized wage statement (pay stub) each time you pay them, detailing gross wages, hours worked, withholdings, and net pay. If you pay a household employee $2,700 or more in a calendar year (for 2024), you must withhold and pay Social Security and Medicare taxes. Warnings and limitations: In California, household workers like nannies are almost always considered employees, not independent contractors. Misclassifying an employee can lead to significant fines, back taxes, and other legal penalties. The process can be complex, and many household employers use a specialized payroll service to handle these filings. This is general information and does not constitute legal advice. For complex situations or specific questions about your obligations, consult with a qualified California attorney or tax professional.