Know the Rules
Before You Hire.

Schedule H (Form 1040) is filed with your personal income tax return each April. It calculates household employment taxes you owe for the prior calendar year. You'll report total wages paid, Social Security/Medicare taxes, FUTA liability, and any federal income tax you withheld. Missing this filing triggers IRS notices and potential penalties of 5% per month on unpaid taxes.

As a household employer, you can either increase your own W-4 withholding at your day job to cover the additional employment taxes, or make quarterly estimated payments using Form 1040-ES. The due dates are April 15, June 15, September 15, and January 15. Under-payment penalties apply if you owe more than $1,000 at filing time.

Always a W-2. The IRS classifies household employees (nannies, housekeepers, senior caregivers) as employees — not independent contractors — because you control when, where, and how they work. Issuing a 1099 to a household employee is incorrect and exposes you to back taxes, penalties, and interest. W-2s must be delivered by January 31.

The State Department sets the minimum weekly stipend at 75% of the federal minimum wage for a 45-hour work week. At the current $7.25 federal minimum, that equals approximately $195.75 per week. However, many states with higher minimum wages (California, New York, Washington) require higher stipends — often $250–$350 per week. Check your specific state's calculation.

J-1 au pairs are limited to 45 hours per week and no more than 10 hours per day. These are federal Department of State limits — not suggestions. Exceeding them puts the au pair's visa status at risk and can disqualify your host family from future au pair sponsorship. Track hours weekly and keep records.

Host families must contribute at least $500 per year toward the au pair's post-secondary educational coursework. The au pair must complete a minimum of 6 semester hours (or equivalent) of academic credit at an accredited U.S. institution. The educational allowance is separate from the stipend and cannot be deducted from it.

Yes. Extensions of 6, 9, or 12 months are available through the sponsoring agency, for a maximum total stay of 24 months. The extension must be initiated before the original DS-2019 expires. Both the host family and au pair must agree, and the au pair must remain in good standing with no visa violations. The additional $500 educational contribution applies to each year.

The five highest-impact clauses are: (1) Guaranteed hours — specifying minimum paid hours regardless of family schedule changes; (2) Overtime rate — explicitly stating 1.5× for hours over 40/week; (3) Trial period — a 2-week mutual evaluation window with simplified termination terms; (4) Confidentiality — protecting family privacy without being punitive; and (5) Severance formula — typically 1–2 weeks per year of service, agreed to in advance.

Verbal employment agreements can be legally binding in most states, but they are nearly impossible to prove in a dispute. Without written terms, courts default to state labor law minimums — which may be more generous to the employee than what you intended. A written work agreement, signed by both parties before the first day of work, is your only reliable protection.

At minimum: full legal names and addresses, start date, job description and primary duties, hours of work (scheduled and maximum), gross weekly salary, overtime policy, paid time off (vacation, sick, holidays), health benefit contribution if any, confidentiality terms, trial period, termination notice requirements, and severance formula. For live-in arrangements, add housing terms, meal provisions, and private space guarantees.

Federal law does not mandate notice for at-will household employment terminations. However, your written work agreement controls — if it specifies 2 weeks' notice, that term is enforceable. Most states require immediate payment of final wages upon termination (California within 72 hours, New York by next regular payday). Check your state's final pay laws before the last day.

In at-will employment states (most of the U.S.), yes — but with important exceptions. You cannot terminate for discriminatory reasons (race, religion, sex, national origin, pregnancy, disability), for reporting illegal activity (whistleblower protections), or in retaliation for filing a wage complaint. Document performance issues contemporaneously, not after the fact.

Final wages (all earned, unpaid compensation), accrued unused vacation if your agreement or state law requires payout, any agreed severance per your contract, and a W-2 by January 31 of the following year. If you provided health insurance, COBRA continuation notice is required within 14 days. Return any personal property. Get a signed receipt for the final check.

If an au pair departs before their program end date, notify your sponsoring agency immediately — they are legally responsible for the au pair's welfare and visa status. The agency will arrange rematch or repatriation. You are not responsible for return airfare if the au pair voluntarily leaves, but document everything. Withheld stipends for "unworked time" are illegal — pay through the last day worked.

It depends on your state. New York, California, Hawaii, Washington, and several others require workers' compensation for household employees — often with no minimum-hours threshold. Other states exempt household workers entirely. The consequence of going uninsured in a mandatory state isn't just a fine: if your nanny is injured on the job, you can be held personally liable for all medical costs and lost wages. Check your state's workers' comp board before the first day of work.

Standard homeowners policies typically exclude workplace injuries to household employees, or provide very limited medical payments coverage ($1,000–$5,000) that won't cover a serious injury. Some insurers offer domestic employee endorsements for an additional premium. This is not a substitute for workers' comp in states that require it, but it can supplement coverage where workers' comp is optional.

New York, New Jersey, California, Hawaii, and Rhode Island require employers to provide state disability insurance (SDI) or temporary disability insurance (TDI) for household employees meeting minimum earnings thresholds. This covers non-work-related illness and injury. The premium is typically shared between employer and employee — usually less than $5/week total.