Posts about Unemployment Insurance

I recently started using a housecleaner who's not part of a service and therefore triggers the household employee rules. She only comes once every other week; many homeowners have their houses cleaned more often.

The federal part is not that complicated, though it could also be simpler. At the end of the year, I have to create a W-2, give it to my housecleaner. I also send a copy of the W-2, a W-3, and 6.2% 7.65% of what I paid her, and the similar amount (but, this year, smaller, thanks to tax cuts) I withheld from her paycheck, to the IRS.

In addition, I have to register with DC DOES for unemployment insurance. The cost is quite small, but the paperwork is plentiful and confusing.

First, to register, you have to fill out a form FR-500, which seems to aim to be the one single comprehensive registration point for every business, whether a homeowner with 1 housecleaner, or a multinational corporation that has tens of stores in the District.

It takes 4 clicks on the DOES site just to get to a page that explains what form you need to fill out, and which then says it's on "cfo.dc.gov" without providing a direct link. You then have to go through 9 long screens of mostly irrelevant information.

It's clear the form isn't designed with homeowners in mind from the first page, which has a drop-down for your title. It can be "Owner," "CEO," "President," "Partner," "Vice-President," "CFO," "Attorney," "Treasurer," "Accountant," "Secretary," or "Other."

Then the second page asks for type of business, with choices of "Sole Proprietor," "Limited PartnerShip" [sic], "Limited Liability Company," "Government," "General Partnership," "Joint Venture," "Limited Liability Partnership," "Corporation," or "Other."

If you're not daunted by having to choose "Other" twice, you get to proceed through a few more screens where you explain whether, among other things, you're going to store merchandise in a DC warehouse, will purchase cigarettes outside DC for sale, and much more.

But the ordeal isn't necessarily over once you complete the forms.

Next, Office of Tax and Revenue might send you 6 separate letters, in separate envelopes, because you, your spouse, and your accountant all need separate logins, all of which go to your address. They all also get passwords in separate letters.

Now, you wait for DOES to send you forms. They have to decide whether you are a quarterly or annual filer. According to the DC rules, household employers can just fill out a single form once a year, at tax time. Other companies have to file reports and pay money each quarter.

In my case, DOES entered things into the system as a quarterly filer, for some reason. In January, I found out from the aforementioned accountant that I have to do all this for our housecleaner for last year. But since DOES put me in as a quarterly filer, I am delinquent for not previously filing during multiple quarters last year, and they have between sending scary-looking notices (in even more envelopes).

There's also a form where I can check a box to ask to be an annual filer, but just for next year, and if I don't do that within 30 days, I will have to file quarterly all year. Fortunately, when I called DOES, the helpful employee fixed it right up and changed me to an annual filer in the system.

That didn't stop me from later getting a booklet of 12 monthly forms which I don't think I have to file. But to decide that, I have to figure out what bracket my DC withholding liability is, based on confusing instructions on page 3 of the booklet. Bear in mind that I'm not even paying that much, as this cleaner just comes for a few hours every other week.

And after all this, I get a new letter from the US Department of Labor in September saying, "All employers covered by Unemployment Insurance laws are assigned an industry code once they begin business operations. Your State agency and the Bureau of Labor Statistics (BLS) do not have sufficient business activity information to assign an industry code to your firm."

This is odd, since I had to pick a code for that old FR-500 back in January. Now they are asking me to fill out another form which, among other things, asks for the activities from my employees and the percentage of sales or revenue from each activity. Naturally, I make no money from the business of having my house cleaned.

And for all this, how much do I have to pay DC for unemployment insurance? About $90 for the whole year.

How can this be better? It's simple. Create a 1-page form for household employers that you can use if and only if you are employing people in your own home for domestic work, that doesn't make money. Leave out all the questions about whether you're also a cigarette importer.

Automatically register everyone who uses the form as an annual filer. Create a simple annual form for them to report their wages. And make sure your computer system codes everyone as a household employer so BLS doesn't need to ask them a battery of questions all over.

In the meantime, if you need to get your house cleaned, hire a service. If you don't do that, I can't advise you to break the rules and just not tell the tax authorities, but we all know that's what most people do. DC could help encourage more compliance by making it a lot easier to follow the law and not have to decipher tens of confusing and sometimes contradictory forms.