What is Schedule H for Household Employment Taxes?
How do you report household employees on your taxes? Do you even need to report them? It’s all in Schedule H.
Are you responsible for household employment taxes?
You might have one household employee who you pay cash wages for a few hours of household work every week. Their total cash wages amount to a few thousand dollars in a calendar year. Do you need to pay taxes as a household employer? It depends, and misclassifying your household workers comes with major financial and legal risk.
If people work for your household on a consistent basis, and they don’t work for other households, then they are likely your employees. If you can control how and when they do the work, they’re employees. Typically, nannies, housekeepers, butlers, and house managers are all examples of employees.
If your household worker sets their own schedule, decides how to do the work, and tells you how they’d like to be paid, then they’re likely independent contractors (think plumbers, occasional babysitters, etc).
If your household worker is self-employed, you don’t have to worry about tax payments. But if you have employees, then you also have the responsibilities of an employer.
A household employer has many responsibilities — treating your employees kindly, communicating clearly, and paying fairly, among others — but one of the most important is paying employment taxes. It’s not the most enjoyable duty, but it makes you a good citizen and protects you from getting into trouble with the IRS as a responsible taxpayer.
If you pay employment taxes, you likely must report them on Schedule H, also known as Form 1040, when submitting your annual federal income tax return.
Do you qualify for submitting Schedule H?
There are three conditions that trigger Schedule H. If you meet one or more of these situations, then you must submit the form.
- If you paid one employee at least $2,300 during the 2021 tax year
- If the total amount of wages you paid to all household employees reached $1,000 or more during any calendar quarter during 2021 or 2020
- You withheld income tax from an employee’s paycheck, even if he didn’t earn at least $2,300
If you paid less than those amounts and didn’t withhold income tax, then you don’t need to submit Schedule H. But most household employers will need to fill out the form.
What are the household employment taxes?
There are three federal taxes that any employer must pay (and report on Schedule H).
- Social security tax: 6.2% (your employee must pay the same amount)
- Medicare tax: 1.45% (your employee must pay the same amount)
- Federal unemployment tax or FUTA: 6% (only applies to the first $7,000 of wages per employee per year)
You may be required to pay state unemployment insurance taxes, too. It’s a good thing, because if you do, then you can get credit (up to 5.4%) to reduce the FUTA tax rate on your Schedule H.
Report all these taxes — your share of social security and Medicare, your employee’s share of social security and Medicare, and the federal and state unemployment taxes — on Schedule H.
How to fill out and file Schedule H
On Schedule H, three formulas (for the three types of taxes) will help you calculate how much total employment tax you owe. It’s based on how much you paid your household employees during the year. Once you figure out that number, write it in the “Other Taxes” section of the form.
Submit Schedule H (Form 1040) along with your individual income tax return. If you’re not submitting a personal income tax return, file Schedule H by itself.
You’ll also need to submit Form W-2 (for reporting wages paid to your employees) and file Form W-3 (for sending Copy A of Form W-2 to the Social Security Administration). With those three tax forms, you’ve got all your bases covered for paying your household employees legally. You’re paying your employees above the table, and you’re paying the government all the taxes you owe.
This should take a load off your mind. With everything organized and above-board, you have nothing to worry about.
What to know about Schedule H, employment tax filings, payroll and more
If you’re paying your household employees cash wages, and overlooking your tax liability, you’re taking a risk with your finances and your reputation. Using a payroll service takes the work out of paying your household employees legally, and minimizes your household’s risk.
Paying your staff legally is easy with our partner HomePay. They facilitate household payroll in three simple steps:
- Customized payroll process. Set up a pay cadence that works for you, and they’ll onboard your employees to save you time.
- Tax returns filed automatically. They prepare your quarterly and year-end taxes – filed on-time, every time. Guaranteed.
- Unlimited access to experts. Contact their award-winning tax, payroll & HR specialists to have your questions answered quickly and accurately.
That’s it! Get started today.