Cardinal Point Wealth Management Provides Guidance on U.S. Taxpayer Implications for Household Workers

Cross-Border Financial Advisor highlights the Complexities of Household Employment Taxes

Cardinal Point Wealth Management, a leading cross-border wealth management firm, is offering valuable insights and guidance to U.S. taxpayers regarding the proper classification of household workers, such as nannies, housekeepers, and gardeners, and the associated tax implications. Understanding the distinction between independent contractors and employees is crucial for employers to ensure compliance with tax regulations and avoid potential penalties.

In the United States, contributions to Medicare and Social Security are mandatory for both employees and employers. Medicare requires a total contribution of 2.9%, with employees responsible for half (1.45%) and employers covering the remaining half. Social Security contributions amount to 12.4%, divided equally between the employee and the employer, resulting in 6.2% each on all taxable employment or net self-employment income, subject to an annual maximum.

Cardinal Point Wealth Management advises that determining whether a household worker qualifies as an independent contractor, or an employee depends on several factors. These factors include the level of control exerted over the worker, the nature of the work performed, the degree of independence, and the relationship between the employer and the worker.

If a worker meets the criteria for an independent contractor, they are responsible for remitting their own taxes, including the full 15.3% for Medicare and Social Security contributions. In this case, the independent contractor will deduct their expenses and remit the appropriate amount.

Consider a scenario where a worker enters into a contract for services totaling $10,000. As an independent contractor, they deduct their expenses and pay full Medicare and Social Security contributions, equal to 15.3%. But if they’re classified as an employee, $765 is deducted from their pay for their share of FICA, resulting in a net pay of $9,235. The employer also pays $765 for the employee’s share of FICA and an additional $765 for the employer’s share, totaling $1,530 in FICA contributions to the U.S. Treasury. This means the employer’s total cost in this example would be $10,765. It is crucial for employers to accurately determine the classification of their household workers to ensure compliance with tax laws. Misclassifying workers can result in severe penalties, including fines and potential legal consequences.

Cardinal Point Wealth Management strongly recommends consulting with qualified tax professionals or legal advisors to properly assess the employment status of household workers and comply with all applicable tax regulations. They can provide personalized guidance based on individual circumstances, helping taxpayers navigate the complexities of tax obligations associated with household employees.

For more information about tax implications related to household workers or to schedule a consultation with Cardinal Point Wealth Management’s team of experienced financial advisors, please contact: [email protected].

About Cardinal Point Wealth Management:

Cardinal Point Wealth Management is a leading independent cross-border financial advisory firm specializing in cross-border wealth management for individuals, families, and businesses in the United States and Canada. With a team of experienced professionals, Cardinal Point provides comprehensive cross-border financial planning, cross border investment management, and cross-border tax planning services to help clients achieve their financial goals across borders. With offices in the United States and Canada, Cardinal Point Wealth Management is well-equipped to assist clients with their unique financial needs in both countries.

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Company Name: Cardinal Point Wealth Management
Contact Person: Kris Rossignoli
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Phone: 8662132036
Address:2255 Glades Road, Suite 324A
City: Boca Raton
State: FL 33431
Country: United States