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You don't have to pay taxes on payments that you make to independent contractors, because they are treated as business owners themselves, and they're responsible for paying their own self-employment taxes. If you get domestic workers through an agency, the agency is generally considered the employer. But if you use independent workers and your arrangement gives you the right to control not only the type of work that must be done, but how it must be done (such as what specific tasks must be done by a maid, what cleaning products should be used, etc.), you will be considered an employer.
Generally, you must pay employment taxes if you paid any one employee cash wages of $1,500 or more in 2007 (unless the worker was a student under age 18 at any time during the year). You must also pay if you paid total cash wages of $1,000 or more in any calendar quarter of the current or previous year to any number of household employees.
However, if you hire your spouse or your child under age 21, you don't need to pay any payroll taxes. If you hire your parent, you don't pay federal unemployment tax, and you don't need to pay Social Security or Medicare tax unless your parent cares for a child who lives with you and is under 18 or disabled, and you are divorced and not remarried, you are widowed, or you're married to a person whose physical or mental condition prevents him or her from caring for the child.
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