For 2009, Michigan is a credit reduction state. A state that has not repaid money it borrowed from the federal government to pay unemployment benefits is a "credit reduction state." The Department of Labor (DOL) determines these states. If an employer pays wages that are subject to the unemployment tax laws of a credit reduction state, that employer must pay additional federal unemployment tax. If you paid any wages that are subject to the unemployment compensation laws of the State of Michigan, your FUTA tax credit is reduced. See page H-5 in the 2009 Instructions for Schedule H (Form 1040) for more information.

The social security and Medicare wage threshold will remain at $1,700 for 2010. This means that if you pay a household employee cash wages of less than $1,700 in 2010, you do not have to report and pay social security and Medicare taxes on that employee's 2010 wages. For more information, see Social security and Medicare wages on page 4.

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

The information in this publication applies to you only if you have a household employee. If you have a household employee in 2010, you may need to pay state and federal employment taxes for 2010. You generally must add your federal employment taxes to the income tax that you will report on your 2010 federal income tax return.

This publication will help you decide whether you have a household employee and, if you do, whether you need to pay federal employment taxes (social security tax, Medicare tax, federal unemployment tax, and federal income tax withholding). It explains how to figure, pay, and report these taxes for your household employee. It also explains what records you need to keep.

This publication also tells you where to find out whether you need to pay state unemployment tax for your household employee.

We welcome your comments about this publication and your suggestions for future editions.

You can write to us at the following address:

 
Internal Revenue Service 
Business Forms and Publications Branch 
SE:W:CAR:MP:T:B:C 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

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You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

If you have a tax question, check the information available on www.irs.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.

You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.

You pay Betty Shore to babysit your child and do light housework 4 days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.

Household work is work done in or around your home. Some examples of workers who do household work are:

• Babysitters
• Caretakers
• Cleaning people
• Domestic workers
• Drivers
• Health aides
• Housekeepers
• Maids
• Nannies
• Private nurses
• Yard workers

If only the worker can control how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.

A worker who performs child care services for you in his or her home generally is not your employee.

If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

You made an agreement with John Peters to care for your lawn. John runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees.

More information about who is an employee is in Publication 15-A, Employer's Supplemental Tax Guide.