Paying the Tax You report and pay the required federal payroll taxes for your household employees along with your regular individual income tax return. Schedule H, Household Employment Taxes, is used to figure the amount of the tax that you owe. Reporting Wages to Employees You need to give your household employees Form W- 2 ,Wage and Tax Statement, to report wages and tax withholding for the year. The W-2 is due to the employee by Jan.
You must also file a copy of the W-2 with the Social Security Administration usually by the end of February. So that you have all the necessary information available for timely filing, you may want to have your workers fill out Form W-9, Request for Taxpayer Identification Number and Certification, when you hire them.
That way you will have data on file to complete W-2s when the time comes. If you have household employees, you will need to obtain an employer identification number for yourself. This number is not the same as your Social Security Number. The information on this form will help you determine the correct amount of income tax to withhold. You should record in a journal each payday the wages and withholding of household employees.
Set up a separate record for each employee with room for the following information:. Keep employment tax records for at least four years after the later of: If You Have Other Employees If, in addition to your household employees, you have employees in a sole proprietorship, you can choose whether to pay the employment taxes of your household workers with your personal tax return or along with your business payroll returns.
If you choose the latter option, you file W-2s for you household employees along with those of all your business employees. Have You Forgotten Anything? Here's a quick checklist of issues you should make sure you have considered when you hire and pay household employees:. Are the Payroll Taxes you Pay Deductible? In most cases, the payroll taxes you pay in connection with your household workers wages are not deductible on your individual tax return. The IRS considers these taxes, and the wages on which they are based, to be personal, nondeductible expenses.
However, there are a couple of circumstances when you may be eligible for a tax benefit for the payroll taxes you pay: In these two situations, the payroll taxes that you include are the FUTA federal unemployment tax, state unemployment tax, and your portion of the Social Security and Medicare taxes that you have actually paid during your tax year. For example, if you paid FUTA tax in January for medically deductible wages that you paid to a nurse in the prior year, you would include the FUTA tax as part of your medical expenses on your current year return return for the year in which the FUTA tax was actually paid.
Publication 926 (2019), Household Employer's Tax Guide
The wages paid in the prior year are deductible on your prior year return. Do not include the Social Security and Medicare taxes, federal and state income taxes, or other state or local taxes you've withheld from the employee's wages, since these amounts are already part of the gross wages for which you are claiming the credit or deduction.
The Medicare tax rate is 1. There is no wage base limit for Medicare tax. For more information, see Cash wages , later. Qualified parking exclusion and commuter transportation benefit. Qualified bicycle commuting reimbursement suspended. Section of Public Law suspends the exclusion of qualified bicycle commuting reimbursements from your employee's income for any tax year beginning after and before Certification program for professional employer organizations.
PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. To become and remain certified under the certification program, certified professional employer organizations CPEOs must meet various requirements described in sections and and related published guidance.
Also see Revenue Procedure , I. Filing due date for Forms W-2 and W A state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits is a "credit reduction state. If you paid any wages that are subject to the unemployment compensation laws in any credit reduction state, your federal unemployment FUTA tax credit is reduced.
See the Instructions for Schedule H Form for more information. Notice provides that certain Medicaid waiver payments are excludable from income for federal income tax purposes. See Notice , I. For more information, including questions and answers related to Notice , go to IRS. Generally, as an employer, you're responsible to ensure that tax returns are filed and deposits and payments are made, even if you contract with a third party to perform these acts. You remain responsible if the third party fails to perform any required action. Before you choose to outsource any of your payroll and related tax duties that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes to a third-party payer, such as a payroll service provider or reporting agent, go to IRS.
However, with respect to certain employees covered by a CPEO contract, you may also be treated as an employer of the employees and, consequently, may also be liable for federal employment taxes imposed on wages and other compensation paid by the CPEO to such employees. For more information on the different types of third-party payer arrangements, see section 16 in Pub. Photographs of missing children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank.
You can help bring these children home by looking at the photographs and calling THE-LOST if you recognize a child. The information in this publication applies to you only if you have a household employee. If you have a household employee in , you may need to pay state and federal employment taxes for You generally must add your federal employment taxes to the income tax that you will report on your federal income tax return.
This publication will help you decide whether you have a household employee and, if you do, whether you need to pay federal employment taxes social security tax, Medicare tax, FUTA, and federal income tax withholding. It explains how to figure, pay, and report these taxes for your household employee. It also explains what records you need to keep. This publication also tells you where to find out whether you need to pay state unemployment tax for your household employee. We welcome your comments about this publication and your suggestions for future editions. You can send us comments from IRS.
Although we can't respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. We can't answer tax questions sent to this address. Otherwise, you can go to IRS. Your order should arrive within 10 business days. If you have an employment tax question, check the information available on IRS. You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done.
If the worker is your employee, it doesn't matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job. You pay Betty Shore to babysit your child and do light housework 4 days a week in your home.
Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee. Household work is work done in or around your home. Some examples of workers who do household work are: Household work doesn't include services performed by these workers unless the services are performed in or around your private home.
A separate and distinct dwelling unit maintained by you in an apartment house, hotel, or other similar establishment is considered a private home. Services not of a household nature, such as services performed as a private secretary, tutor, or librarian, even though performed in your home, aren't considered household work. If only the worker can control how the work is done, the worker isn't your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.
A worker who performs child care services for you in his or her home generally isn't your employee. If an agency provides the worker and controls what work is done and how it is done, the worker isn't your employee. You made an agreement with John Peters to care for your lawn.
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John runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees. More information about who is an employee is in sections 1 and 2 of Pub.
When you hire a household employee to work for you on a regular basis, you and the employee must complete the U. No later than the first day of work, the employee must complete the employee section of the form by providing certain required information and attesting to his or her current work eligibility status in the United States. You must complete the employer section by examining documents presented by the employee as evidence of his or her identity and employment eligibility. Acceptable documents to establish identity and employment eligibility are listed on Form I You should keep the completed Form I-9 in your own records.
The form must be kept available for review upon notice by an authorized U. If you have questions about the employment eligibility verification process or other immigration-related employment matters, contact the USCIS Office of Business Liaison at If you have a household employee, you may need to withhold and pay social security and Medicare taxes, pay federal unemployment tax, or both.
To find out, read Table 1. You don't need to withhold federal income tax from your household employee's wages. But if your employee asks you to withhold it, you can. If you need to pay social security, Medicare, or federal unemployment tax or choose to withhold federal income tax, read Table 2 for an overview of what you may need to do. If you don't need to pay social security, Medicare, or federal unemployment tax and don't choose to withhold federal income tax, read State employment taxes next.
The rest of this publication doesn't apply to you. You should contact your state unemployment tax agency to find out whether you need to pay state unemployment tax for your household employee. For a list of state unemployment tax agencies, visit the U. Department of Labor's website at oui. You should also determine if you need to pay or collect other state employment taxes or carry workers' compensation insurance.
If you have a household employee and you're required to withhold and pay employment taxes and you don't, you will generally be liable for the employment taxes that you should've withheld and paid. See section 2 in Pub. Interest and penalties may also be charged. You may also have to pay a penalty if you don't show your employee's social security number SSN on Form W-2 or don't provide correct information on the form. Your employee's share is 7. Your parent see Wages not counted , later, for an exception , or. Any employee under the age of 18 at any time in see Wages not counted , later, for an exception.
The social security tax pays for old-age, survivors, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance. Both you and your household employee may owe social security and Medicare taxes. Your share is 7. Your employee's share is also 7. In addition to withholding Medicare tax at 1.
Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. Generally, you can use Table 3 to figure the amount of social security and Medicare taxes to withhold from each wage payment. You can either withhold your employee's share from the employee's wages or pay it from your own funds.
If you decide to pay the employee's share from your own funds, see Not withholding the employee's share , later. You figure social security and Medicare taxes on the social security and Medicare wages you pay your employee. However, any noncash wages you pay don't count as social security and Medicare wages. Cash wages include wages you pay by check, money order, etc. Cash wages don't include the value of food, lodging, clothing, transit passes, and other noncash items you give your household employee.
However, cash you give your employee in place of these items is included in cash wages. Noncash wages paid to household employees aren't subject to social security taxes or Medicare taxes; however, they are subject to federal income tax unless a specific exclusion applies. Report the value of taxable noncash wages in box 1 of Form W-2 together with cash wages. Don't show noncash wages in box 3 or in box 5 of Form W Also see section 5 of Pub.
Certain state disability plan payments that your household employee may receive are treated as social security and Medicare wages. For more information about these payments, see the Instructions for Schedule H Form and the notice issued by the state. Count these wages if both the following conditions apply. Your parent cares for your child including an adopted child or stepchild who is either of the following. Has a physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks in the calendar quarter services were performed.
An employee who is under the age of 18 at any time during the year. Count these wages if providing household services is the employee's principal occupation. If the employee is a student, providing household services isn't considered to be his or her principal occupation. Continue to count the employee's cash wages as Medicare wages to figure Medicare tax. If you reimburse your employee for qualified parking, transportation in a commuter highway vehicle, or transit passes, you may be able to exclude the cash reimbursement amounts from counting as cash wages subject to social security and Medicare taxes.
Qualified parking is parking at or near your home or at or near a location from which your employee commutes to your home. It doesn't include parking at or near your employee's home. See Transportation Commuting Benefits in Pub. Any cash reimbursement over these amounts is included as wages. However, if you prefer to pay the employee's share yourself, see Not withholding the employee's share , later.
Don't report withheld taxes that you repaid to the employee on Form W Generally, you can use Table 3 to figure the proper amount to withhold. You will pay the amount withheld to the IRS with your share of the taxes. If you make an error by withholding too little, you should withhold additional taxes from a later payment. If you withhold too much, you should repay the employee. Jane worked for the remainder of the year a total of 46 weeks. Jane didn't give Mary a Form W-4 to request federal income tax withholding.
See the completed examples of Form W-2 and Form W-3 for at the end of this publication. For information on withholding and reporting federal income taxes, see Pub. If you prefer to pay your employee's social security and Medicare taxes from your own funds, don't withhold them from your employee's wages. The social security and Medicare taxes you pay to cover your employee's share must be included in the employee's wages for income tax purposes. However, they aren't counted as social security and Medicare wages or as federal unemployment FUTA wages. You decide to pay your employee's share of social security and Medicare taxes from your own funds.
The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act FUTA that pays unemployment compensation to workers who lose their jobs. Like most employers, you may owe both the federal unemployment tax the FUTA tax and a state unemployment tax. Or you may owe only the FUTA tax or only the state unemployment tax. To find out whether you will owe state unemployment tax, contact your state's unemployment tax agency.
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You should also find out if you need to pay or collect other state employment taxes or carry workers' compensation insurance. The FUTA tax is 6. However, you may be able to take a credit of up to 5. Your credit for is limited unless you pay all the required contributions for to your state unemployment fund by April 15, See the Instructions for Schedule H Form For an explanation of cash wages, see the discussion about Social security and Medicare wages under Social Security and Medicare Taxes , earlier.
Don't count wages you pay to any of the following individuals as FUTA wages. You should withhold federal income tax only if your household employee asks you to withhold it and you agree. The employee must give you a completed Form W If you and your employee have agreed to withholding, either of you may end the agreement by letting the other know in writing.
Use the federal income tax withholding tables in Pub. Figure federal income tax withholding on taxable wages before you deduct any amounts for other withheld taxes. Withhold federal income tax from each payment of wages based on the filing status and allowances shown on your employee's Form W Figure federal income tax withholding on both cash and noncash wages you pay.
Household Employees and Your Taxes
Although wages paid to a child, spouse, or parent may be excluded from social security, Medicare, and FUTA taxes as described earlier, these wages are still subject to federal income tax. Measure wages you pay in any form other than cash by the fair market value of the noncash item. Lodging provided to your employee at your home for your convenience and as a condition of employment.
A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train. See section 5 of Pub. Any income tax you pay for your employee without withholding it from the employee's wages must be included in the employee's wages for federal income tax purposes.
It also must be included in social security and Medicare wages and in federal unemployment FUTA wages. Certain workers can take the earned income credit EIC on their federal income tax return. This credit reduces their tax or allows them to receive a payment from the IRS. You must give your household employee a notice about the EIC if you agree to withhold federal income tax from the employee's wages as discussed earlier under Do You Need To Withhold Federal Income Tax? If you give your employee that copy by January 31, you don't have to give the employee any other notice about the EIC.
If a substitute Form W-2 is given on time but doesn't have the required EIC information, you must notify the employee within 1 week of the date the substitute Form W-2 is given. If Form W-2 is required but isn't given on time, you must give the employee Notice or your written statement about the EIC by January If Form W-2 isn't required, you must notify the employee by February 7.
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Add these household employment taxes to your income tax. Pay the amount due by April 15, You can avoid owing tax with your return if you pay enough tax during the year to cover your household employment taxes, as well as your income tax. You can pay the additional tax in any of the following ways. You may be subject to the estimated tax underpayment penalty if you didn't pay enough income and household employment taxes during the year. However, you won't be subject to the penalty if both of the following situations apply to you.
You won't have federal income tax withheld from wages, pensions, or any other payments you receive.
Your income taxes, excluding your household employment taxes, wouldn't be enough to require payment of estimated taxes. Complete Form W-4 and show the additional amount you want withheld from each paycheck on the appropriate line of Form W If you receive a pension or annuity and want more federal income tax withheld to cover household employment taxes, give the payer a new Form W-4P or a similar form provided by the payer.
Complete Form W-4P and show the additional amount you want withheld from each benefit payment on the appropriate line of Form W-4P. It will help you compare your total expected withholding for with the combined income tax and employment taxes that you can expect to figure on your tax return. If you want to make estimated tax payments to cover household employment taxes, get Form ES.
You can use its payment vouchers to make your payments by check or money order. Estimated tax payments can also be made by cash, credit or debit card, and several electronic payment methods. For details, see the form instructions or go to IRS. You can pay all the employment taxes at once or you can pay them in installments.
If you have already made some estimated tax payments for , you should increase your remaining payments to cover the employment taxes. Estimated tax payments for are due April 15, June 17, and September 16, , and January 15, If you own a business or a farm operated for profit, you can choose either of two ways to pay your household employment taxes.
You can pay them with your federal income tax as previously described, or you can include them with your federal employment tax deposits or other payments for your business or farm employees. For information on depositing employment taxes, see section 11 of Pub. See Business employment tax returns , later. The deduction that can be taken on Schedules C and F Form for wages and employment taxes applies only to wages and taxes paid for business and farm employees. You can't deduct the wages and employment taxes paid for your household employees on your Schedule C or F.
For more information about paying taxes through federal income tax withholding and estimated tax payments, and figuring the estimated tax penalty, see Pub. You must file certain forms to report your household employee's wages and the federal employment taxes for the employee if you pay any of the following wages to the employee. You must include your EIN on the forms you file for your household employee. It isn't the same as a social security number SSN.
You ordinarily will have an EIN if you previously paid taxes for employees, either as a household employer or as a sole proprietor of a business you own. If you already have an EIN, use that number. File a separate Form W-2 for each household employee to whom you pay either of the following wages during the year. We encourage you to file Form W-2 electronically. Electronic filing is available to all employers and is free, fast, and secure. If you're not required to file a Form W-2, we encourage you to provide your household employee with a receipt for services that includes the dates worked, wages paid, and a general description of work completed.
This receipt will help the household employee to report his or her wages on Form If an employee stops working for you before the end of , you can file Form W-2 and provide copies to your employee immediately after you make your final payment of wages. You don't need to wait until If the employee asks you for Form W-2, give it to him or her within 30 days after the request or the last wage payment, whichever is later.
Use Schedule H to report household employment taxes if you pay any of the following wages to the employee. File Schedule H with your federal income tax return by April 15, If you get an extension to file your return, the extension also will apply to your Schedule H. You can file Schedule H by itself.
See the Schedule H instructions for details. If, besides your household employee, you have other employees for whom you report employment taxes on Form , Form , or Form and on Form , you can include your taxes for your household employee on those forms. See Business employment tax returns next. Employers having the options listed above include certain tax-exempt organizations that don't have to file a tax return, such as churches that pay a household worker to take care of a minister's home. Don't use Schedule H if you choose to pay the employment taxes for your household employee with business or farm employment taxes.
See Payment option for business employers , earlier. Instead, include the social security, Medicare, and withheld federal income taxes for the employee on the Form or Form you file for your business or on the Form you file for your farm. If you report the employment taxes for your household employee on Form , Form , or Form , file Form W-2 for that employee with the Forms W-2 and Form W-3 for your business or farm employees.
For information on filing Form or Form , see Pub. For information on filing Form , see Pub.
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Both of these publications also provide information about filing Form You must also keep records to support the information you enter on the forms you file. On each payday, you should record the date and amounts of all the following items. Any employee social security tax you withhold or agree to pay for your employee. Any employee Medicare tax you withhold or agree to pay for your employee. You must keep a record of your employee's name and SSN exactly as they appear on his or her social security card if you pay the employee either of the following.
You must ask for your employee's SSN no later than the first day on which you pay the wages. You may consider asking for it when you hire your employee. You should ask your employee to show you his or her social security card. The employee may show the card if it is available.
You may, but aren't required to, photocopy the card if the employee provides it.