Schedule H (Form 1040) is a tax form used by household employers in the United States to report and pay household employment taxes. This form is part of the annual individual income tax return (Form 1040) and is specifically designed to capture information related to domestic workers.
What Is Schedule H?
Schedule H is required for individuals who employ household employees such as nannies, housekeepers, gardeners, or other domestic workers and must report wages paid, and taxes owed, including:
- Social Security and Medicare taxes
- Federal Unemployment Tax Act (FUTA) taxes
- Federal income taxes withheld from the employee’s pay (if any)
Household employers who are required to file must complete Schedule H and submit it with their Form 1040 by the annual tax filing deadline.
Types of Taxes Reported on Schedule H
Social Security and Medicare Taxes
Household employers must pay a portion of both Social Security and Medicare taxes and withhold a portion from their employee’s wages. The combined FICA (Federal Insurance Contributions Act) tax rate for Social Security is 6.2% each for the employer and employee, and for Medicare, it’s 1.45% each.
Federal Unemployment Tax (FUTA)
The FUTA tax provides unemployment compensation to workers who have lost their jobs. Household employers pay 6% on the first $7,000 of wages paid to each household employee.
Federal Income Tax Withholding
Though not required, household employers can withhold federal income tax if both employer and employee agree. The amounts withheld must also be reported on Schedule H.
Special Considerations
Wage Thresholds
If you pay a household employee cash wages of $2,400 or more in 2024 (this threshold can change annually), you must report and pay Social Security and Medicare taxes. For FUTA, the threshold is $1,000 or more in any calendar quarter.
Exemptions
Certain payments to household employees might be exempt from employment taxes such as payments made to your spouse, your child under age 21, your parent (with some exceptions), or any employee under the age of 18 at any time during the year.
Historical Context
The requirement to report household employment taxes using a specific form was introduced to streamline the process and ensure proper adherence to tax laws. The current Form Schedule H was designed to consolidate the reporting of these taxes into a single form filed with the household employer’s annual tax return.
Applicability
Household employers are required to file Schedule H if they meet the wage thresholds and have the responsibility of withholding and paying the specified taxes. Detailed instructions are provided by the IRS to aid in accurate filing.
Comparisons and Related Terms
Form 1040
The primary form used by individuals to file their annual income tax return. Schedule H is an attachment to Form 1040.
SE (Schedule SE) (Form 1040)
Used to calculate self-employment tax. Unlike Schedule H, which reports employment taxes for household employees, Schedule SE is used by self-employed individuals to report and calculate their own Social Security and Medicare taxes.
IRS Form 941
Filed quarterly by businesses to report income taxes, Social Security tax, and Medicare tax withheld from employees. Household employers use Schedule H instead of Form 941 for their household employees.
FAQs
Who is considered a household employee?
What if I paid my household employee less than the threshold amount?
Can I file Schedule H electronically?
Summary
Schedule H (Form 1040) is essential for household employers to report and pay federal employment taxes. It covers Social Security, Medicare, and FUTA taxes and may include withheld federal income taxes. Accurate and timely filing ensures compliance with IRS regulations and avoids potential penalties.
References
- IRS Publication 926, “Household Employer’s Tax Guide”
- IRS Schedule H (Form 1040) Instructions
- Internal Revenue Code Section governing employment taxes
Use this comprehensive guide to ensure compliance with employment tax laws related to household employees. Proper understanding and accurate filing of Schedule H can prevent tax issues and ensure lawful payment of your domestic workforce.
