Paying your household employees is complex enough, but many employers don’t realize there are critical steps once they are no longer employing. The work does not stop just because employers are no longer paying wages. Nest Payroll can handle your future tax work for a one-time fee if you elect this (if your subscription is active and has been ongoing/no gaps, this work is automatically included). Your other option is to do it yourself. Think twice before doing it on your own because it’s a lot to take on.

Here’s a checklist if you are going to do this on your own:

1- Make sure you have completed all filings to your state’s unemployment dept. This could include a recent quarterly filing that is still due, plus the next quarterly filing if you are already into the next quarter, even if there are no wages to report. If your reporting frequency is annual, you may have to make a total of four filings, depending on how your state requires the data to be reported (and you may be required to wait until Jan the following year to make the annual filing). If you haven’t paid wages in a particular quarter, then file a zero wage report for that quarter. Some states assess penalties if you don’t file a report, even if it’s a zero wage report.

State taxes are usually due the month after a quarter ends: April, July, September and January

Nest Payroll files your data into an agent account only accessible by us. Filing electronically may require you to register an online account first. You may need to call your state directly if you have questions on how to do this. Your state may also have paper forms available that you can fill out instead of filing electronically.

2- Close your state unemployment account once all quarterly unemployment filings are made and taxes are paid. If you don’t close the account, your state will require you to keep filing regardless of whether wages are being paid. You may be required to pay late fees if you forget to file and the account is still open. Sometimes you can close the account online, but some states require a paper form to be faxed or mailed. Calling the unemployment department to let them know you are no longer employing may also take care of closing your account. Also make sure the mailing address they have on file is correct so you receive any important letters.

3- If you have a state withholding account (to pay any state income tax you withheld), you need to make all current filings complete just like with your unemployment account. If you want to file electronically, you may be required to register an online account first, though some states have a way to do a one-off payment without having to create online access. You may need to call your state directly if you have questions on how to do this. Your state may also have paper forms available that you can fill out instead of filing electronically.

Make sure all withheld state income tax has been reported and paid. Some states are annual and won’t allow you to file until January the following year. Your state may also require W-2s to be entered for all your employees and you may need to do an annual reconciliation return.

4- Close your state withholding account once all quarterly filings are made and taxes are paid. Make sure the mailing address they have on file is correct so you receive any important letters. If you don’t close the account, your state will require you to keep filing regardless of whether wages are being paid. Usually you can close the account online, but some states require a paper form to be faxed or mailed. Also make sure the mailing address they have on file is correct so you receive any important letters.

5- If your state has a Family Leave or similar additional taxes, you will need to make sure all the quarters are filed for and paid. You may need to register for online access to handle these particular filings, and once you know all filings have been completed and paid, close the accounts.

6- If needed, make a final federal tax payment covering any social security, medicare, federal income tax and unemployment tax due (a combination of your employer tax and the employee’s taxes you withheld). Go to the IRS website and make the payment as a federal 1040-ES (estimated payment) using your SSN (do not use your EIN). You shouldn’t need to set up an account to do this, the IRS provides an easy way to make estimated payments tied to your SSN. The federal tax periods are different from the state:

Federal taxes are due in:

  • April (covering January /February /March)

  • June (covering April/May)

  • September (covering June/July/August)

  • January (covering September/October/November/December)

7- In January, go to the SSA website to enter the data to create a W-2 for each employee using your EIN. You will need to register as an employer and create an account, which could take several days and require special passcodes from the IRS to be mailed to you. Make sure you select the type of W-2 as “household”. There may be other methods you can use, listed on the SSA website for first-time filers. Once completed, you should receive a PDF form at the end with your employee’s W-2 which you are required to give to your employee by January 31st.

8- Go to the IRS website and download the form for a Schedule H, which is how you report your household tax and is the only way to qualify for child/dependent care tax credits. Fill out the form and use this form to include with your personal income tax return due in April.