What Schedule H (Form 1040) 2016 Is For
Household employers use IRS Form 1040 Schedule H (2016) to report and pay household employment taxes on wages paid to a household employee in 2016. These taxes include Social Security tax, Medicare tax, federal unemployment tax, and any federal income tax withheld. A household employee is someone who performs work in a private home and whose work is controlled by the employer. This may include nannies, caregivers, housekeepers, personal chefs, yard workers, and au pairs.
The Internal Revenue Service requires Schedule H when an employer pays a household employee at least $2,000 in cash wages during 2016 for purposes of Social Security and Medicare tax. Employers must also file Schedule H if they paid $1,000 or more in any calendar quarter of 2015 or 2016 for federal unemployment purposes. The schedule is filed with Form 1040, Form 1040NR, Form 1040-SS, or Form 1041. When an individual is not required to file Form 1040, Schedule H can be filed separately.
When You’d Use Schedule H (Form 1040)
An individual files Schedule H when household employment taxes apply for wages paid to a household employee in the 2016 tax year. This includes situations where Social Security tax, Medicare tax, or federal unemployment rules were triggered during the year. The form is also required when federal income tax withholding was arranged using Form W-4.
Schedule H must be filed with IRS Form 1040 unless the taxpayer has no filing requirement, in which case Schedule H is filed alone. Late or amended filings use Form 1040X to correct prior IRS forms and ensure accurate reporting with the Internal Revenue Service. Employers who meet the wage thresholds should file promptly to reduce penalties and interest.
Key Rules or Details for 2016
For 2016, Social Security tax and Medicare tax applied when a household employee received at least $2,000 in cash wages. Employers also owed federal unemployment tax when total household wages reached $1,000 or more in any quarter of 2015 or 2016. These rules apply to nannies, caregivers, personal chefs, au pairs, and other similar workers who provide services in a private home.
Certain family-based exemptions apply, such as wages paid to a spouse or a child under age 21, which are not subject to FICA tax. Employers must issue Form W-2, submit Form W-3 to the Social Security Administration, and maintain accurate tax forms and records to ensure compliance with tax regulations. Obtaining an Employer Identification Number is required because Schedule H cannot be filed using a Social Security number.
For complete details on wage reporting, withholdings, and tax filings, see our guide for Individual Schedules.
Step-by-Step (High Level)
1. Determine Whether You Are a Household Employer
A household employer is an individual who controls the manner and timing of work performed. This includes families hiring a nanny, caregiver, or housekeeper.
2. Calculate Wages Paid During 2016
Include only cash wages for Social Security and Medicare tax purposes. Determine whether wage thresholds were met for both FICA tax and federal unemployment.
3. Complete Part I of Schedule H
Part I requires calculating Social Security tax and Medicare tax based on eligible wages. The employer withholds the employee’s share and pays an equal amount as the employer’s share. If the employer agreed to cover the employee’s share without withholding, that amount must still be reported.
4. Complete Part II for Federal Unemployment
Part II applies when the employer meets the quarterly wage threshold. The employer calculates federal unemployment tax and applies available state tax credits.
5. Total Household Employment Taxes
Schedule H Part III totals the employer’s FICA tax, federal unemployment tax, and any voluntary federal income tax withholding.
6. Attach Schedule H to Form 1040
Schedule H is attached to Form 1040 for the 2016 tax year. If filing separately, complete the signature portion on Schedule H and submit payment.
Items to Prepare Before Filing:
- Wage records for each household employee
- Completed Form W-2 and Form W-3
- Employer Identification Number
- State unemployment contribution records
- Any federal income tax withholding agreements
Each item ensures accurate reporting and reduces the chance of errors during the filing process.
Common Mistakes and How to Avoid Them
- Misclassifying a household employee as an independent contractor: Determine worker status based on the employer’s control over how the work is performed to avoid penalties and incorrect tax assessments.
- Misapplying wage thresholds: Apply the $2,000 per-employee threshold for Social Security and Medicare taxes and the $1,000 quarterly threshold across all employees for FUTA.
- Missing Form W-2 and Form W-3 deadlines: File both forms with the Social Security Administration by the end of January to avoid penalties, even if Schedule H is filed correctly.
- Overlooking state unemployment rules: Review state-specific unemployment filing and payment requirements, since late SUTA payments reduce federal FUTA credits.
- Failing to coordinate federal and state obligations: Track deadlines and payment thresholds across both systems to prevent unexpected IRS adjustments and additional unemployment tax liability.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once Schedule H is filed with IRS Form 1040, the Internal Revenue Service adds household employment taxes to any federal income taxes owed for 2016. If the taxpayer overpaid, the excess is refunded or carried forward to the following year. Any underpayment results in a balance due that must be resolved by the filing deadline.
The Social Security Administration uses Form W-2 to update the employee’s earnings record for future Medicare and Social Security benefits. State unemployment contributions are handled separately and do not flow through Schedule H. If errors are discovered later, the taxpayer may amend the return using Form 1040X and submit corrected IRS forms as needed.
FAQs
Does Schedule H apply if an agency provided the worker?
If the agency controls how the work is performed, it is considered the employer. If the family controls the work, Schedule H applies.
Is federal income tax withholding required for a household employee?
Withholding is optional unless the employee requests it using Form W-4.
Can an employer pay the employee’s share of Social Security tax and Medicare tax?
Yes, when the employer pays the employee’s share, the payment becomes additional taxable income to the employee.
What should an employer do if Form W-2 was not filed on time?
The employer should file Form W-2 and Form W-3 as soon as possible. Penalties may apply, but filing promptly reduces potential charges.
Are wages paid to a parent always exempt?
Not always; when specific caregiving conditions are met, wages may be taxable for Social Security tax and Medicare tax purposes.
Does Schedule H apply when wages are below $1,000 per quarter?
It depends on the type of tax. Federal unemployment may not apply, but Social Security tax and Medicare tax may be applicable if an individual employee's wages reach $2,000.
For more resources on filing or understanding other IRS forms, visit our Form Summaries and Guides Library.
