[Fredslist] MTA tax and household employees

[Alan Klein]

I have been seeing a number of accounting firms advising their clients that if they employ a household employee, they are not subject to the MTA tax for that employee. I thought it important to advise everyone that if the employer is withholding and remitting withholding tax for the household employee then they ARE subject to the MTA tax.

Withholding state and city tax from a Household employee is voluntary in New York.  The below text is from New York States publication 27 "What you need to know if you hire Household Help"

Withholding income tax (federal or New York State) from wages paid to
household employees is voluntary on your part and your employee. If you
and your employee voluntarily agree, federal or New York State income
tax, or both, may be withheld. In addition, you may agree to withhold for
New York City or Yonkers income tax, or both.
If you and your employee agree to withhold New York State income tax
from your employee's wages, your employee should use Form IT-2104,
Employee's Withholding Allowance Certificate and Instructions, to
determine the number of withholding allowances to claim for withholding
tax purposes. You will then use this information to determine the amount of
tax to withhold.
If you withhold income tax from your employee, you must file
Form NYS-45 and Form NYS-45-ATT, if applicable, each calendar quarter.
Returns are mailed to registered employers before the quarter ends. A
registered employer, who does not receive the tax forms, should call the
Withholding Tax Information Center.


The MTA tax is required for all employers who are required to withhold taxes from their employees. Based on that language and the fact that withholding for household employees is voluntary, many accounting firms are advising their clients they are not liable as I stated above.

Although there is nothing in writing I can point anyone to at this time - New York State just this week issued an internal memo dealing with this issue. Their official position is that once an employer opts to withhold and pay taxes for the employee, they are now part of the New York State income tax system subject to the rules of all required withholders and therefore subject to the MTA tax.

We are told that the tax departments legal department is currently working on writing up the appropriate information to address this.

Anyone with questions is welcome to call me or you can call New York State's tax unit administering the MTA tax at 866-579-2498 .

Alan


Alan S Klein, President
Ace Payroll Services Inc
1860 Walt Whitman Road
Suite 600
Melville, New York 11747
Tel:  516-420-9500
Fax: 516-420-9615
www.acepayroll.com

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