Household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your private residence as your employee. Repairmen, plumbers, contractors, and other business people who provide their services as independent contractors, are not your employees. Household workers are your employees if you can control not only the work they do but also how they do it.
Schedule H (Form 1040), Household Employment Taxes
If taxpayers pay wages subject to FICA tax, FUTA tax, or if they withhold federal income tax from a household employee's wages,they should file Form 1040, Schedule H. If the taxpayer is not required to file a return, they must still file Schedule H to report household employment taxes.
Social Security and Medicare Taxes (Federal Insurance Contributions Act – FICA)
If a taxpayer pays cash wages of $2,100 or more for 2018 (this threshold can change from year to year) to any one household employee, they generally must withhold 6.2% of Social Security and 1.45% of Medicare taxes (for a total of 7.65%) from all cash wages paid to that employee. The taxpayer also must pay their share of Social Security and Medicare taxes, which is also 7.65% of cash wages. (Cash wages include wages paid by check, money order, etc.) Unless the taxpayer would prefer to pay the employee's share of Social Security and Medicare taxes from their own funds, they should withhold 7.65% from each payment of cash wages made.
Tax preparers can find the specified dollar amounts and percentages under the topic "Do You Need To Pay Employment Taxes?" in Publication 926. Pay the amount the taxpayer withheld to the IRS with an additional 7.65% for their share of the taxes. If the taxpayer pays the employee's share of Social Security and Medicare taxes from their own funds, the amounts they pay for the employee count as wages for purposes of the employees' income tax.
Taxpayers should not withhold or pay social security and Medicare taxes from wages paid to:
- Their spouse,
- Their child who is under age 21,
- Their parent, unless an exception is met; or
- An employee who is under age 18 at any time during the year, unless performing household work is the employee's principal occupation. If the employee is a student, providing household work is not considered to be his or her principal occupation.
Estimated Tax Payments
Taxpayers filing Form 1040, Schedule H can avoid owing taxes with their return if they pay enough tax before filing the return to cover both the employment taxes for the household employee and the taxpayer's income tax. If they are employed, they can ask their employer to withhold more federal income tax from their wages during the year. The taxpayer can also make estimated tax payments to the IRS during the year using Form 1040-ES. They may have to pay an estimated tax underpayment penalty if they do not pay your household employment taxes during the year. Refer to Tax Topic 306.
To enter Schedule H in TaxSlayer Pro, from the Main Menu of the Tax Return (Form 1040) select:
- Other Taxes Menu
- Household Employment Tax (Sch H)
NOTE: This is a guide on entering Schedule H into the TaxSlayer Pro program. This is not intended as tax advice.