ClientWhys Virtual Tax Update & Review Conference 2020: Household Employees

Описание: This is a snippet of the 2020 ClientWhys Virtual Tax Update & Review Conference. Our speakers, Lee Reams Sr, and Art Werner will walk you through the latest tax-related issues involved with household employee tax.

Students that want to learn more can sign-up for the full lesson or program from the following links:

2020 Tax Update and Review Virtual Conference - 16 Hours CPE

https://www.taxcpe.com/collections/li...


Transcript:

Let's move to our next topic area, Lee. This is household employees there. California does not have the equivalent Schedule H. So California does not allow household employers to pay their state employment taxes as part of their income tax filings. Instead, separate quarterly or annual employment tax returns and payments must be filed with the Employment Development Department. What a pain in the butt. EDD registration, household employers must register with the EDD when payments to one or more employees for household services reach $750 in cash wages in the calendar quarter.

It looks to me like $3,000 yearly if it's evenly paid out over the year. Once you're over that, you've got to register. UI and EDDs tax is once $1,000 or more in cash is paid in a calendar quarter to a household employee, the unemployment insurance and the EDD taxes apply to current and any future years. A SDI threshold, the threshold at which SDI withholding applies to domestic services in a private home is $750 of cash wages paid in a calendar quarter. The STI rate for 2020 is 1% for wages up to $122,909. Income tax withholding is not required, but can be done if requested by the employee.

So Art, go back to that screen for a second.

All right.

What does all that tell you?

Pay cash.

No.

No.

What it tells you is the state makes it so difficult for people to comply that they just pay people with cash. Now the state loses out on what they could have collected for payroll taxes and the income tax from the person that got it.

And if I can make some humor of this, the state also loses the potential benefit of any of these people making payments from eventually running for state office.

Okay.

Now, Lee, it's amazing because it is much easier for federal. And so you would think that California would comply. I don't know what the reasoning is unless they think that they are working in the best interest of an individual here, that employee, I don't get it. But what would that do?

They're working in the best interest of the state, they just don't understand real life.

Yeah. Yeah. You put a nice household employee flow chart here. Would you like me to go through it or you think that's self-explanatory?

Well, it's in the book.

Yeah, it's in the book. And we went through all of this already. This is a flow chart taking you through it. Then we just went through it. So I don't need to walk you through the flow chart. But it's not one of the good flow charts that you're going to find in the big book of taxes, a lot of good ones there. But some of the things on this slide that I do want to cover, meals and lodging, non-cash wages such as meals and lodging are not included when calculating whether the $750 in cash wages threshold are met. Meals and lodging are included once the cash limit of 750 is reached. Some examples are DE 8829 Household Employees, Employer's Guide. Wow. E-file and e-payment requirement, California requires all employers, including household employers, to electronically submit employment tax returns, wage reports and payroll tax deposits to the EDD.

Another reason people don't do it.

Wow.

And then you see penalties for not e-filing.

Oh, my God. My God. Anyway, whatever. Anyway, household employees overview here. Penalties for not filing or paying electronically. Lee, here's your penalties. Annual payroll tax return, $50 per return. Quarterly report, $20 for wage item. Payroll tax deposit, 15% of the amount due. Penalty waiver, waivers may be requested due to the lack of automation, severe economic hardship, current exemption from federal government or some other good cause. Good luck. No retroactive waiver requests. Request received after the due date for the quarter requests will be processed for the subsequent quarter and approved. Waiver will be valid for four consecutive quarters beginning with the effect of quarter. See California 2020 Payroll Tax Chart on Section 11, chapter four, page five of the big book.