Household Employers Taxing Household Employees

Article highlights:

• Examples of household employees
• Types of household employees income
• Income amount required to be reported
• Income schedules and forms to report
• Records required to be kept

1. Household Employees

Examples of household employees:

Above household employees receive a W-2 from their household employers or employers accountant and not a form 1099.

Learn and understand EITC thresholds and ensure every payment is included in your W-2.

Types of household employee income:

• Salary and bonuses
• Overtime pay
• Vacation and sick pay
• Car allowances- Gift cards
• Taxes not withheld from paycheck

2. Household employers

Salaries and wages paid to household employees over $2,200 must be reported.

You are not required to withhold federal income tax from salaries and wages of your household employee.

However, you are required to file:

• Social security and Medicare wages.
• FUTA wages.
• Wages from which you withhold federal income tax.

Schedule H, Forms 941, 943 or 944

File Schedule H with your 1040 tax return as well as state withholding and unemployment reports.

Schedule H will either decrease your tax refund or increase your tax liability on your 1040 return.

To avoid dual tax reporting use either schedule H or 941 – quarterly form.

Note that IRS allows household employers who are self-employed – business or farm to include their household employees on their business payroll on forms 941, 943 or 944.

Record keeping includes:

• Employee’s cash and non cash wages.
• Employee social security tax that you withhold from your employee.
• Employee Medicare tax that you withhold from your employee.
• Any federal income taxes you withhold.
• Any state employment taxes you withhold.

For more on info. visit: Household Employer’s Tax Guide – Pub 926