What Schedule H Is For
Schedule H helps household employers report Social Security, Medicare, and federal unemployment taxes when they pay a household employee enough taxable income to trigger federal taxes.
The form supports a complete income tax return by ensuring accurate reporting on the 1040 Form, including any required entries on Schedule 2, Schedule 3, or Schedule SE for self-employment tax. It also aligns with the forms used for standard deductions, itemized deductions, and applicable tax credits.
When You’d Use Schedule H
You use Schedule H when you pay a household employee at least the annual threshold that requires reporting employment taxes for the current year. You also file if you withhold federal income taxes from wages reported on a Form W-2 or if you pay FUTA tax on household employee wages. Taxpayers filing late or amending a prior income tax return attach Schedule H to Form 1040-X when correcting employment tax entries.
Key Rules or Details for 2020
- Wage threshold for Social Security and Medicare taxes: You must file when a household employee receives enough taxable income to trigger federal taxes, and you must calculate the employer share using proper tax rate tables. These rules ensure accurate reporting.
- FUTA obligations for household employment: You file when total wages reach the annual FUTA threshold, and you verify eligibility for credits related to state unemployment systems. This method prevents incorrect tax liability.
- Employee identification requirements: You collect a valid Social Security Number or Individual Taxpayer Identification Number from each employee to complete required tax forms. This ensures every return matches IRS records.
- Exemptions for certain family workers: You exclude wages paid to a spouse, a child younger than 21, or a parent performing household services. This prevents the filing of unnecessary paperwork.
- Reporting on related schedules: You enter totals from Schedule H onto Schedule 2 or Schedule SE and attach all required schedules when submitting your income tax return. This ensures that federal income taxes are properly supported.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-step (High Level)
Step 1: Determine whether you have a household employee
You identify any worker whose tasks you control and review whether their income meets the IRS threshold for federal taxes. This step confirms the need to include Schedule H with your income tax return.
Step 2: Gather wage and tax information
You collect payment records, withholdings, and identifying documents such as a Social Security Number. This ensures accurate reporting on Form W-2, Schedule H, and related tax forms.
Step 3: Calculate Social Security, Medicare, and FUTA taxes
You compute employer taxes using the correct tax rate for 2020 and include any required additional entries. This keeps your individual income tax return accurate and compliant.
Step 4: Transfer totals to Form 1040
You enter the tax amounts on Schedule 2, Schedule 3, or other schedules required for the 1040 Form. This ensures your federal income taxes properly reflect household employment taxes.
Step 5: File your return and retain documentation
You submit your full income tax return, including Schedule H and required schedules, and store all records for audit or verification. This protects you if the IRS website requests confirmation.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Incorrect worker classification: You can avoid errors by reviewing whether a worker qualifies as an employee instead of an independent contractor, because proper classification ensures accurate federal income taxes. You can prevent issues by checking IRS guidance before filing.
- Missing wage records or identification: You can avoid delays by collecting wage documents, payment logs, and a Social Security Number for each worker, because these support accurate entries. You can prevent mismatches by verifying all details early.
- Failing to include Schedule H totals on Form 1040: You can avoid miscalculations by transferring totals onto Schedule 2 or Schedule SE, because incomplete reporting affects tax liability. You can prevent mistakes by reviewing each schedule before filing.
- Not amending prior errors: You can avoid long-term problems by using Form 1040-X when correcting employment tax entries from previous years, because amended returns require updated schedules. You can prevent repeated issues by checking entries before submission.
- Missing the filing deadline: You can avoid penalties by submitting your income tax return on time or requesting an extension using Form 4868, because timely filing reduces interest. You can prevent penalties by keeping reminders for April deadlines.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
When you send in Schedule H with your Form 1040 or amended income tax return, the IRS processes the employment tax information and uses it to lower your federal income tax bill. Once the return is accepted, you will get a confirmation. If any of the taxable and nontaxable income entries need more explanation, the IRS may ask for more proof. You keep records to help with Social Security, Medicare, and FUTA calculations for the rest of the year.
FAQs
How does Schedule H affect my tax liability when filing an individual income tax return?
Schedule H updates your total tax liability by adding household employment taxes to federal income taxes reported on Form 1040. This ensures that all federal taxes are reported on a single income tax return.
Can I amend a prior tax year return that included Schedule H using Form 1040-X?
You can amend a prior income tax return by attaching a corrected Schedule H to Form 1040-X. This updates your individual income tax return and replaces earlier tax forms.
What filing status should I select when Schedule H is required on Form 1040?
Your filing status follows Form 1040 rules, and Schedule H does not change your selection. Your taxable income and adjusted gross income determine how federal taxes apply.
Do tax credits such as the Child Tax Credit or Earned Income Credit interact with Schedule H?
Tax credits reduce federal income taxes on Form 1040 and do not replace household employment taxes reported on Schedule H. You calculate both separately for your income tax return.
How do I enter income averaging or special computations, such as Schedule J, when Schedule H is attached?
You complete Schedule J or other special forms first, then include household employment taxes from Schedule H on Schedule 2. Both calculations are reported on your 1040 Form.
Does Schedule H affect retirement reporting, such as IRA distributions?
IRA distributions appear on Schedule 1 and do not change household employment tax calculations. Both items remain part of your full individual income tax return.
Where can I find official instructions on preparing Schedule H for federal taxes?
You can review instructions on the IRS website, which provides detailed guidance for Schedule H, related schedules, and all applicable tax forms for the current year.
