Schedule H - Household Employment Taxes

           If you have any type of household employee, you are liable for household employment taxes.  These employment taxes include Social Security and Medicare taxes, otherwise known as FICA, as well as federal unemployment taxes, otherwise known as FUTA.

            The term “household employee” includes caregivers for children or the elderly, cleaners, cooks, and people providing other personal services in your home.  An important clarification is whether or not the person providing the service is actually your employee.  If you control what work the person does and how they do it, they are considered your employee.  If you do not control the work done and how it is done, for example by a nanny provided by an agency, that person is not your employee.  The agency would be paying the service provider, and taking care of any employer taxes, and you would simply be paying the agency.  A self-employed person would also not be considered an employee.  Self-employed household service providers would normally have their own equipment and tools, and would control how the work is completed.

           Like any other employer-employee relationship, you and the employee would need to fill out the I-9 form, verifying that the employee is legally eligible to work in the United States.  You, as an employer, would need to have an Employer Identification Number (EIN).  You would need the person’s name and Social Security number, and would complete a Form W-2 to report their wages and taxes withheld for the year.  Withholding of federal income tax is not required for household employees, but normally you need to withhold Social Security and Medicare taxes, and also pay the employer (matching) portion.

           If you paid any one or more household employees wages of $1,400 or more, or withheld federal income tax for a household employee, you must file Schedule H.  Schedule H is also required if you paid at least $1,000 in any one calendar quarter of the prior year to all of your household employees.  Schedule H would be filed with your income tax return, or by itself if you are not required to file a return.  You must still file by the filing deadline, even if filing Schedule H by itself.

           Schedule H is not required to be filed if the household employee is your husband or wife, your child under 21 years old, your parent, or anyone less than 18 years old if household services is not his or her main profession.

             Fortunately for those with household employees, Schedule H is a very simple form.  It reports household employee wages subject to Social Security and Medicare taxes, calculates the tax amount, lists any federal income tax withheld, and subtracts any advance Earned Income Credit payments, to arrive at net taxes due.  This tax amount is then carried to your Form 1040 to figure your total tax liability.

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