What Form 1040 Schedule H Is For
Schedule H reports Social Security, Medicare, and federal unemployment taxes when someone hires a household employee and directs how the work is done. It attaches to an individual income tax return, such as Form 1040, Form 1040-SR, or Form 1040-NR. It supports accurate reporting of taxable income, tax liability, and other federal taxes for the 2019 tax year.
When You’d Use Form 1040 Schedule H
A taxpayer uses Schedule H when a household employee receives at least two thousand one hundred dollars in cash wages during 2019 or when wages reach one thousand dollars in any quarter. It still applies whether the person files with itemized deductions on Schedule A or uses the standard deduction. If an amended income tax return is necessary, the taxpayer files Form 1040-X with a corrected Schedule H and updated Form W-2.
Key Rules or Details for 2019
- Social Security and Medicare rules: These taxes apply once an employee receives $2,100 in cash wages, and all wages become taxable at that point. Employers and employees share the cost, and the totals are reported on Schedule 2 of the income tax return.
- Annual wage limits: Social Security taxes apply only to the first $132,900 in 2019, while Medicare taxes apply without a limit. Taxpayers closely review their wages to determine whether the Additional Medicare Tax applies.
- FUTA requirements: FUTA applies once total household wages reach $1,000 in any quarter, and it covers up to $7,000 of wages per employee. The employer pays this tax fully rather than withholding it from employees.
- Family wage exceptions: Payments to a spouse, a child younger than twenty-one, or most parents do not require Social Security, Medicare, or FUTA taxes. These exceptions reduce overall income tax liability and simplify reporting for many families.
- Optional withholding: Federal income tax withholding occurs only when an employee requests it using Form W-4. Withholding appears on Form W-2 and affects the employee’s own income tax return.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Verify employee status
A taxpayer checks whether the worker is an employee by evaluating control over work details and reviewing guidance on the IRS website. This step ensures the correct use of Schedule H and prevents unnecessary future adjustments.
Step 2: Obtain an Employer Identification Number
A taxpayer applies for an Employer Identification Number because Schedule H does not allow the use of a Social Security Number. The online EIN tool provides an immediate assignment and supports accurate reporting on Form W-2.
Step 3: Prepare Form W-2
A taxpayer completes Form W-2 to report Social Security wages, Medicare wages, and any optional withholding. The employer gives copies to the employee and files them with the Social Security Administration by the annual deadline.
Step 4: Complete Schedule H
A taxpayer calculates Social Security, Medicare, and FUTA taxes and enters totals on Schedule H. These amounts are reported in Schedule 2 on IRS Form 1040 and combined with other allowable income tax items for the year.
Step 5: Attach Schedule H
A taxpayer attaches Schedule H to Form 1040, Form 1040-SR, or Form 1040-NR and keeps wage and employment records for at least four years. These records support IRS requests and confirm accurate reporting of taxable income.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Incorrect worker classification: Some taxpayers treat employees as contractors even when they control work details. You can avoid this by reviewing IRS classification rules and confirming whether the worker meets the definition of an employee. Both control and supervision guide this decision.
- Misunderstanding wage thresholds: Many taxpayers believe only wages above $2,100 are taxable. You can avoid mistakes by remembering that all wages count once the threshold is met. Reviewing each employee’s totals helps prevent underreported federal taxes.
- Missing FUTA rules: FUTA uses a different requirement that often confuses taxpayers. You can prevent errors by checking quarterly wage totals and determining whether they reached one thousand dollars. This early check avoids incorrect filings.
- Using a Social Security Number instead of an EIN: Some people use their Social Security Number on Schedule H. You can avoid delays by applying for an EIN early and using it on all related tax forms. This protects accuracy across filings.
- Submitting Form W-2 late: Late W-2 filings cause penalties and processing delays. You can prevent such penalties by completing the forms well before January 31st and sending copies to the employee and SSA on time. This step supports future Social Security benefits.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Schedule H increases total tax liability on IRS Form 1040 because household employment taxes count as part of federal taxes for the year. The IRS matches the information with Form W-2 and contacts the taxpayer if wage or Social Security details do not align. Filing on time supports the accuracy of the Earned Income Credit, Education Credits, and other tax credits, ensuring the employee receives proper reporting for future Social Security benefits.
FAQs
When do I file IRS Form 1040 Schedule H for household employment taxes?
You file Schedule H when a household employee reaches wage thresholds for Social Security, Medicare, or FUTA. These wages must appear on your individual income tax return.
How does Schedule H affect my income tax return and income tax liability?
Schedule H adds household employment taxes to your overall income tax liability on IRS Form 1040. These totals are listed on Schedule 2 and are combined with other federal taxes.
Which tax forms connect with Form 1040 Schedule H?
Schedule H works with Form W-2, Schedule 2, and other tax forms listed as needed on the IRS website. These forms ensure correct reporting on your individual income tax return.
How do I correct mistakes on Schedule H for the current year or prior years?
You can correct mistakes by filing Form 1040-X along with a corrected Schedule H. Additionally, updated Form W-2c copies may be required for your employee.
Do I still need Schedule H if I pay self-employment tax on Schedule SE?
Yes, self-employment tax on Schedule SE is separate from household employment taxes. Schedule H remains required when household employee wages meet filing thresholds.
Should I keep records after filing Schedule H?
Yes, keep wage records, EIN details, Form W-2 copies, and employment information for a minimum of four years. These documents help resolve IRS questions and support accurate Social Security reporting.
