Do you employ a household employee? Or, are you thinking about potentially hiring one? If so, you should know that hiring a household worker is not synonymous with hiring regular employees.
When it comes to being a household employer, you must prepare for additional responsibilities. One of your newfound responsibilities is filing a Schedule H form. So, what is a Schedule H?
What is a Schedule H?
Schedule H, Household Employment Taxes, is a form that household employers use to report household employment taxes to the IRS. A Schedule H breaks down household employee payment and tax information.
You must file an IRS Schedule H if one or more of the following is true:
- You pay at least one household employee cash wages of $2,100 or more in the calendar year
- You pay total cash wages of $1,000 or more in any calendar quarter of the current or previous tax year to all household employees
- A household employee asks you to withhold federal income tax
When determining whether or not you must file Schedule H, do not count cash wages paid to your spouse, child under age 21, or parent.
Defining household employees
So, who counts as a household employee? There’s a fine line between household employees subject to household employment taxes and individuals who work at your home (e.g., independent contractors).
People who provide services at your home, such as plumbers or electricians, are not considered household employees.
Household employees perform work in and around your home and have a more permanent position. Household employees typically include:
- Housekeepers or maids
- Gardeners or landscapers
- Personal assistants
- Personal chefs
Keep in mind, the work performed is not exactly what determines whether or not the worker is a household employee. A worker is your household employee if you control the work they do and how it is done.
If the worker controls how the work is done (e.g., contractor), they are usually considered self-employed.
Household employment taxes
Account for household employment taxes, otherwise known as nanny taxes, on your Schedule H tax form. Household employment taxes typically include Social Security, Medicare, and federal unemployment taxes (FUTA tax).
Both you and your household employee must contribute to Social Security and Medicare taxes. Your household employee does not need to pay FUTA tax. You are responsible for paying FUTA taxes.
Your household employee must contribute 6.2% for Social Security tax and 1.45% for Medicare tax. Withhold your employee’s contribution from their wages and contribute an employer match. As a household employer, you must also contribute 6.2% for Social Security tax and 1.45% for Medicare tax.
If you’re required to pay state unemployment insurance (SUI or SUTA tax), you might be qualified for a reduced FUTA tax rate. There is a credit on the Schedule H form that allows you to reduce your FUTA tax rate. Check with the IRS for more information about the credit.
Confused about who needs to contribute what when it comes to household employees? Check out our handy chart below:
|FUTA||Percentage varies (0.6% – 6%)||N/A|
How and when to file Schedule H
After you determine whether you need to file a Schedule H, you need to know how to fill it out and file it.
When filling out a Schedule H form, include the following information:
- Your name, SSN, and Employer Identification Number (EIN)
- Wages paid to your household employee(s)
- Social Security and Medicare taxes withheld
- FUTA tax liability
- Income tax deducted from the employee’s wages (if applicable)
- Your signature
- The date
After you finish filling out your form, send it to the IRS. If you file Form 1040, U.S. Individual Income Tax Return, attach Schedule H to your tax return form. If you’re not filing a tax return, you can file Schedule H by itself.
Most household employers must file Schedule H and pay household employment taxes by April 15 each year. If you live in Maine or Massachusetts, you have until April 17. Keep in mind, due dates might vary depending on if the date falls on a weekend or holiday.
For more information about Schedule H filing requirements, check out the IRS’s website.
Schedule H records
If you have a household employee and must file a Schedule H form, make sure you keep your records organized.
You should keep copies of Schedule H for at least four years. Be sure to have a record of each payday, dates, wage amounts, and taxes withheld.
Store your Schedule H records in a safe place. You can keep your records organized using a filing system (e.g., folders and cabinets). Or, you can opt to keep digital files on your computer or mobile device.
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This is not intended as legal advice; for more information, please click here.