What Form 1040 Schedule H (2014) Is For
Employers of household employees use Form 1040 Schedule H to report Social Security, Medicare, and FUTA wages for the 2014 tax year. It applies when a taxpayer’s wage payment meets federal thresholds and requires reporting through a federal income tax return or a stand-alone return if Form 1040-SS or other forms are not required. The form also supports taxpayer rights by helping employers follow IRS rules outlined in tax publications and ensuring accurate reporting for income credit and future benefits.
Schedule H covers both cash and noncash wages, including items such as transit passes, cash reimbursement, and certain fringe benefits. Employers must provide Form W-2 and collect Form W-4 when federal income tax withholding is requested, which ensures proper reporting through mobile-friendly forms or paper filings. These requirements also apply to domestic farm employees when they work in a private household.
When You’d Use Schedule H
A taxpayer uses Schedule H when wage payments to any one household employee are $1,900 or more in 2014 or when FUTA wages reach $1,000 in any quarter for 2013 or 2014. It is required even when payments are made through direct deposit or when a tax preparer assists with reporting. A taxpayer does not file Schedule H when wages are paid to a spouse or a child under the age of twenty-one, or when specific exclusions apply, such as for a household employee (household classifications).
Schedule H is also used when correcting a previously filed return. If a taxpayer files an incorrect return, an amended return with bold letters indicating the correction must be submitted. Late filings follow the IRS period of limitations, and the amended form may be attached to Form 1040X or submitted as a stand-alone return.
For complete details on wage reporting, withholdings, and tax filings, see our guide for Individual Schedules.
Key Rules or Details for 2014
The 2014 rules include specific wage limits, such as the Social Security wage base of $117,000 and no limit for Medicare wages. Employers must account for noncash wages and report them accurately on Form W-2 when required. Optional federal income tax withholding can be added if both the employer and employee complete Form W-4.
FUTA wages are generally limited to the first $7,000 paid to each employee, with credits available for timely state unemployment payments. Payments such as direct deposit, transit passes, and cash reimbursements may be considered wages, depending on IRS criteria. Employers must comply with identification requirements, recordkeeping rules, and any guidelines listed in tax publications for the year.
Step-by-Step (High Level)
Step 1: Determine the worker’s status
A taxpayer must identify whether the worker is a household employee. The employer controls how the work is performed, which determines classification.
Step 2: Collect required forms
A taxpayer must have the employee complete Form W-4 and Form I-9 at the start of employment. The employer must obtain the employee’s Social Security number.
Step 3: Track wage payment and withholding
A taxpayer must track cash and noncash wages paid during the year. This includes Social Security, Medicare, and federal income tax withholding when applicable.
Step 4: Prepare Form W-2
A taxpayer must provide Form W-2 to the employee for the 2014 tax year. The form must accurately report wages, withheld taxes, and employer identification details.
Step 5: Calculate Social Security, Medicare, and FUTA wages
A taxpayer must complete the worksheets in Schedule H to determine household employment taxes. These calculations include FUTA wages and state unemployment contributions.
Step 6: Attach Schedule H to the tax return
A taxpayer must attach Schedule H to Form 1040, Form 1040NR, or Form 1040-SS when required. If a federal return is not needed, Schedule H may be filed as a stand-alone return.
Step 7: Maintain records
A taxpayer must keep payroll records, forms, and payment documentation for at least four years. These records help resolve IRS inquiries.
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Common Mistakes and How to Avoid Them
- Using a Social Security Number instead of an EIN: Apply for and use an Employer Identification Number when reporting household employment taxes to avoid processing delays or errors.
- Misclassifying a household worker as self-employed: Confirm that the employer controls how the work is performed; if so, the worker must be treated as an employee for proper tax reporting.
- Missing Form W-2 filing deadlines: Prepare and issue Forms W-2 on time for household employees to avoid penalties and ensure accurate wage reporting.
- Incorrectly counting excluded wages: Review rules for noncash salaries and wages paid to certain family members to avoid including amounts that should be excluded from taxable wages.
- Not verifying employee identification information: Check names and Social Security numbers before issuing forms to prevent rejected filings and IRS corrections.
What Happens After You File
After Schedule H is filed, the IRS processes household employment taxes along with the taxpayer’s federal income taxes, including any Social Security and Medicare amounts. The employee’s wage information becomes part of their federal earnings record, which affects future benefits. If the IRS identifies an error, it may issue a notice requesting additional information.
A taxpayer must keep records such as Form W-2, wage payment summaries, and tax publications for reference during the period of limitations. These documents may be needed if a tax preparer assists with an audit or if an employee requests proof of wages. Proper documentation helps resolve concerns efficiently and supports taxpayer rights.
FAQs
Does a household employer need an Employer Identification Number?
Yes, an EIN is required for reporting household employment taxes.
Can Schedule H be filed as a stand-alone return?
Yes, a taxpayer may file Schedule H separately when no federal income tax return is required.
Are noncash wages taxable in 2014?
Yes, many noncash wages are taxable unless a specific exclusion applies.
What happens if Schedule H is filed late?
The taxpayer may owe penalties or interest, but may still file the form.
Can a household employee request federal income tax withholding?
Yes, the employee may request withholding by completing Form W-4.
Does Schedule H apply to domestic farm employees?
Yes, it applies when domestic services are performed in a private household.
Can wage payments be made by direct deposit?
Yes, direct deposit is allowed when payment records are accurate and complete.
For more resources on filing or understanding other IRS forms, visit our Form Summaries and Guides Library.
