Individual 401(k) with Household Employee

I am opening an individual 401(k) retirement account in relation to my self-employment income (where I am an independent contractor). The Individual 401(k) plan is intended for businesses that do not employ any common-law employees.

I employ a household employee (my nanny) to take care of my children. She allows me to go to work but she does not work for my business. Is my nanny considered a common-law employee? Or do I qualify for opening the retirement account?

Thank you!

Taking care of your children is not a trade or business and your nanny does not have to be covered by your 401k plan.

What we see more often is the opposite situation where the business owner puts the nanny, gardener, pool boy/girl on the company payroll in an attempt to get some inappropriate tax deductions.

On 12/12/2019 at 3:45 PM, Tina77 said:

I am opening an individual 401(k) retirement account in relation to my self-employment income (where I am an independent contractor). The Individual 401(k) plan is intended for businesses that do not employ any common-law employees.

 

 

I employ a household employee (my nanny) to take care of my children. She allows me to go to work but she does not work for my business. Is my nanny considered a common-law employee? Or do I qualify for opening the retirement account?

 

Thank you!

 

The better question is why aren't you working with a professional to assist in doing your plan.  Probably a "do it yourselfer" and the likelihood is that you will screw up something else along the way.  I wish retirement plans were easy, but they're not.  You did get the correct answer re your household employee.