Hiring a personal assistant may seem like a simple solution to streamlining your financial and personal affairs. However, if you don’t do it right, you could end up with tax penalties and, of course, an extra dose of stress.
This is largely because tax laws classify household employees to whom you pay more than $2,400 annually as employees. And if you’re paying an employee, this means you’re an employer—and therefore responsible for withholding and paying employment taxes and filing required returns.
Here’s what you should know before hiring a personal assistant.
Consider a third-party payroll provider.
Determining how to withhold and pay employment taxes for an employee can be complicated and time consuming. What’s more, the penalties for making a mistake are punitive and unforgiving. For these reasons, consider professional help—i.e., a payroll company—to ensure you’re complying with all applicable tax rules.
Check your state’s laws regarding insurance.
Depending on your state’s laws, you may be required to provide workers’ compensation insurance for your personal assistant. Regardless, it’s a good idea to carry it—as well as liability insurance—for your own protection as an employer. Your attorney or trusted insurance provider can help you secure the appropriate insurance.
Explore options for employee benefits.
While federal laws don’t require you to offer employee benefits to your personal assistant, doing so can be a way to attract and retain talented professionals. If you choose to go this route, consult with an employee benefits plan administrator to determine which benefits will allow you to be competitive.
Find a way to track time and pay.
Have you thought about how you’ll track the hours your personal assistant spends working for you and document their pay? There are plenty of apps that can fulfill this task; your payroll provider may even offer one as part of its services. Regardless of the one you choose, it’s important to have it up and running before you bring your personal assistant on board.
Explore your options for living freely in the moment.
Not addressing the above when hiring a personal assistant could put you in a potentially risky situation—one that is certain to bring headaches your way. One way to avoid this altogether is to consider a family office. Unlike an independent contractor, working with a family office doesn’t turn you into an employer. The family office takes on the role of employer for you, giving you the benefits of a personal assistant without the added risk and stress.
How could a family office help you live more freely? Contact us today to learn more.