Nanny Taxes in Rhode Island

Household employers need to comply with tax, wage, and labor laws that affect nannies, in-home senior caregivers, and other household employees. While federal laws cover employers in all states, there are also state- and city-specific regulations that employers must follow. Here’s what you need to know about nanny taxes in Rhode Island.

Rhode Island Minimum Wage

Household employees must be paid at least the highest of the federal, state, or applicable local minimum wage rates. In Rhode Island, the state rate of $14/hour applies. Recent legislation removed a provision that classified “any individual employed in domestic service or in or about a private home” as not an employee for the purposes of Rhode Island’s minimum wage laws. Previously Rhode Island domestic workers were only guaranteed the federal minimum wage of $7.25 per hour.

Overtime

Household employees in Rhode Island are required to be paid at least time and a half for hours worked over 40 in a seven-day workweek. Overtime compensation is not required for live-in employees and isn’t required when work is performed on a holiday.

Rhode Island State Unemployment Tax & Rate

In Rhode Island, the new employer SUI (state unemployment insurance) rate is 1.00 percent on the first $29,200 of wages for each employee. Employers with previous employees may be subject to a different rate. This is an employer-only tax.

Job Development Tax Fund

Household employers also pay an assessment of 0.21 percent (called the Job Development Fund tax) to support the Rhode Island Human Resource Investment Council (HRIC), which funds projects designed to improve and upgrade the skills of the existing workforce. Your unemployment tax rate is reduced annually by 0.21 percent to ensure that the program doesn’t result in a tax increase.

Temporary Disability Insurance Tax

Rhode Island is one of five states with a disability insurance (TDI) tax paid by employees. This program provides short-term benefits to employees who are unable to work due to a non-work-related injury or illness. Employers are required to withhold this tax from their employee’s pay and remit quarterly with their unemployment and job development taxes. The TDI tax rate is 1.2 percent on the first $87,000 in wages for each employee.

Workers’ Compensation Insurance

Household employers in Rhode Island are not required to have workers’ compensation coverage for any full- or part-time employees. However, you can choose a voluntary policy to protect both you and your employee. Get a quote on workers’ compensation insurance.

Sick and Safe Leave

Under Rhode Island’s Healthy and Safe Families Workplace Act, employees have the right to take time off from work to care for themselves when they are too sick to work, are injured, or have a routine medical appointment. They may also use earned leave to deal with the impact of domestic violence, sexual assault, or stalking. In addition, earned leave may be used to assist their child, spouse, domestic partner, or other members of their household for the same purposes. While employers with fewer than 18 workers – which would include household employers – must provide sick and safe leave time, it does not need to be paid. Covered employees may take up to 40 hours of leave. Learn more about the Healthy and Safe Families Workplace Act.

Rhode Island Payment of Wages Act

The Payment of Wages Act, which takes effect January 1, 2024, will impose criminal penalties on employers for knowing and willful wage and hour violations. If an employer, fails to pay wages owed and/or vacation pay to any eligible employee who separates from employment, the employer may face a fine of up to $5,000. Criminal penalties can also be imposed if an employer fails to pay the full monetary amount lawfully owed to an employee on the next regular payday.

Also, the act penalizes employers that misclassify workers as independent contractors. Civil penalties for a first offense can range from $1,500 to $3,000 for each misclassified employee. Penalties can increase to $5,000 for each subsequent misclassified employee. As a reminder, nannies, in-home senior caregivers, housekeepers, and others are considered household employees and not independent contractors.

The Wage Act applies to all employers, regardless of size or number of employees.

Helpful Links for Nanny Taxes in Rhode Island

Rhode Island Department of Labor and Training

Rhode Island Division of Taxation

Federal Regulations

All household employers need to follow certain federal regulations including:

Fair Labor Standards Act (FLSA) Classification Guidelines

• Household workers are considered employees and not independent contractors. Learn more about misclassifying employees as independent contractors.
• Household workers are also non-exempt employees, which means they receive overtime pay of at least time-and-a-half for hours worked over 40 per workweek. Learn more about overtime pay.

FICA Taxes

Social Security and Medicare taxes are commonly referred to as FICA taxes. If you pay cash wages of $2,700 or more to any household employee in 2024 (or will pay a domestic worker $2,800 or more in 2025), you must withhold and pay FICA taxes. FICA taxes are 15.3 percent of cash wages. As an employer, you pay 7.65 percent (6.2 percent for Social Security and 1.45 percent for Medicare). Your employee's share is also 7.65 percent, which you can withhold from their wages or choose to pay yourself. You don't withhold or owe FICA taxes on wages you pay to your spouse, child under the age of 21, parent, or any employee under 18 at any time during the calendar year.

Federal Unemployment Tax (FUTA)

If you pay a household employee total cash wages of $1,000 or more in any calendar quarter, you'll owe federal unemployment tax. This is an employer-only tax. FUTA is six percent of cash wages on the first $7,000 you pay an employee.

Mileage Reimbursement

If your employee uses their own car in the course of their work, you can reimburse them for mileage. For 2024, the IRS has set the optional standard mileage rate at 67 cents per mile driven. This rate increases to 70 cents per mile on January 1, 2025. Paying mileage is not mandatory or you can reimburse your employee at a different rate. However, if the cost of mileage causes your employee to fall below minimum wage, then you need to reimburse them for mileage.

GTM Can Help with Nanny Taxes in Rhode Island

Call (800) 929-9213 for a free, no-obligation consultation with a household employment expert. We’ll answer all your questions and show you how to comply with wage, tax, and labor laws as a household employer. Or, if you’re ready to have GTM Payroll Services handle it all for you, get started with our nanny payroll and tax service.

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