It is defined as someone who gets paid for their service to perform duties in a home or a residence. Household employees include people such as nannies, senior care providers, cooks, personal assistants, maids, gardeners etc.
The point to be noted is that independent contractors cannot be considered as household employees. Examples of independent contractors are plumbers and repairmen. This is important in context of “nanny tax” which was brought into effect in 2010. Nanny tax is a federal tax that must be paid by employer which employs household employees and pays them a total of more than a threshold amount which is currently 1700$ in that particular year. The reason the IRS charges this because it considers ongoing household service to be the employee of the taxpayer employer and hence the employer must pay social security, Medicare and federal unemployment taxes on the wages being paid to that particular employee. Also in some cases there can be state nanny taxes as well.
The nanny tax is not applicable if the household employee is taxpayer’s parent, wife or someone who is under 18. There is another way to avoid dealing with nanny tax which is by hiring household employees through an agency. In this way the agency becomes the employer and they will be the one who pays the nanny tax.